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EMERGING MARKETS-Latam FX muted, Chile's peso lags for the week on political woes

    * Peso set to lose 2.7% this week
    * Latam FX down this week
    * Argentine stocks near record highs

    By Ambar Warrick
    May 21 (Reuters) - Most Latin American currencies traded
sideways on Friday but were set to lose for the week on fears of
policy tapering by the Federal Reserve, while political concerns
and falling copper prices saw Chile's peso lag its peers.
    The peso rose 0.4% on Friday but was set for a weekly
loss of about 2.7%, its worst in nearly two months, due to fears
of radical policy in Chile after its ruling party failed to
secure a majority in the body that will draft the new
constitution, with independent candidates getting more votes. 
 
    A drop in copper prices also hurt the currency of the
world's largest producer of the red metal, while no. 2 producer
Peru's sol was set to lose about 1.7% this week. 
    Chilean stocks lagged their peers this week with a
more-than 10% loss. 
    Broader Latam currencies were muted, with MSCI's regional
index trading sideways and set to lose about
0.4% this week.
    Risk-driven assets, particularly in emerging markets,
tumbled earlier in the week after the minutes of the Fed's last
meeting showed more talk of stimulus tapering at the bank than
previously thought.
    While the deadline for the Fed to consider tapering is still
a way off, investors fear a continued rise in U.S. inflation
could bring the date forward. 
    "If the Fed really were to move towards a taper debate the
dollar might gain ground considerably. However, for that to
happen the debate would have to start properly - whenever that
may be; first cracks in the previously unanimous front are not
sufficient," Antje Praefcke, FX and EM analyst at Commerzbank
wrote in a note.
    Colombia's peso, which fell 0.3% on Friday, was also
set to lose more than 1% this week, after S&P Global Ratings 
downgraded the country to "junk", or sub-investment grade,
status. 
    Analysts predicted ratings agency Fitch would likely
downgrade the country this year, owing to ongoing
anti-government protests, as well as stretched fiscal spending
due to the COVID-19 outbreak.
    Brazil's real was flat and set for mild weekly
losses, while Mexico's peso fell 0.1% and was set to end
the week largely unchanged.
    Argentina's peso was flat. The country said it will
tighten COVID-19 lockdown measures due to a severe second wave
of the virus.
    However,  Argentine stocks recently hit record highs
as tight capital controls on the peso saw equities become the
favored means of retaining exposure to the country. 
    
    Key Latin American stock indexes and currencies:
    
                              Latest       Daily % change
 MSCI Emerging Markets         1332.42                  0.23
                                        
 MSCI LatAm                    2472.23                 -0.48
                                        
 Brazil Bovespa              122450.43                  -0.2
                                        
 Mexico IPC                   49751.48                 -0.31
                                        
 Chile IPSA                    4079.99                  1.23
                                        
 Argentina MerVal                 0.00                     0
                                        
 Colombia COLCAP               1264.63                   0.8 Currencies             Latest       Daily % change
 Brazil real                    5.2921                 -0.32
                                        
 Mexico peso                   19.9143                 -0.27
                                        
 Chile peso                     718.12                  0.36
                                        
 Colombia peso                 3729.93                 -0.40
 Peru sol                         3.71                  0.00
                                        
 Argentina peso                94.2700                 -0.02
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; Editing by Kirsten
Donovan)
  
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