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EMERGING MARKETS-Latam FX dips; Mexico's peso falls ahead of rate decision

    * Weak oil prices pressure Mexican, Colombian pesos
    * Latam stocks muted, Chile leads losses
    * Peruvian sol stable, but trades near 18-year low
    * Brazil's real rises on strong service-sector data

    By Ambar Warrick
    Nov 12 (Reuters) - Mexico's peso dropped on Thursday ahead
of an interest rate decision, while most other Latin American
units retreated amid tempered expectations for the availability
of a coronavirus vaccine.  
    The peso fell about 0.2%, and was also hurt by
weakness in the oil market after the International Energy Agency
raised doubts about a quick post-COVID-19 pickup in demand.

    Still, the currency is among the best performing Latam units
this year, having benefited recently from expectations of better
trade ties with the United States after Joe Biden took the
presidency. 
    Strength in the peso and higher inflation trends have split
investor expectations for a rate cut later in the day. Mexico's
central bank has also avoided the aggressive rate-cutting cycles
adopted by its regional peers.
    "The recent MXN rally has contributed to muddle the waters
somewhat however, as it has intensified calls for a more dovish
policy outcome... we expect policymakers to weigh the slight
deterioration in inflation against the stronger FX dynamics,"
Gustavo Rangel, chief economist, LATAM, at ING, wrote in a note.
    "Despite the positive vaccine news, the risk of financial
market instability remains elevated with the resurgence of
Covid-19 cases in the U.S. and Europe and the uncertain global
growth outlook."
    A Reuters poll expects Mexico's central bank to cut by 25
basis points to 4.0%. Ratings agency Fitch on Wednesday affirmed
the sovereign rating of Latin America's second-largest economy
at BBB-. 
    Colombia's peso fell about 0.5%, as it also came
under pressure from weak oil prices.
    Brazil's real bucked the trend, rising 0.4% after
data showed services activity rose more than expected in
September, suggesting that certain facets of Latin America's
largest economy were picking up from the pandemic.
    The real was also boosted by positive comments from Economy
Minister Paulo Guedes. 
    While regional currencies and stocks benefited from optimism
over a vaccine earlier in the week, uncertainty over the
availability of the vaccine, as well as continued signs of the
pandemic's economic impact prompted some unwinding in risk
appetite.
    Chilean stocks led losses across the region,
falling about 1%. The MSCI's index of regional stocks
 was largely unchanged.  
     Peru's sol was stable, but trading close to 18-year
lows as the country's new cabinet took shape on Wednesday after
the ouster of centrist President Martín Vizcarra on Monday
plunged the country into turmoil.

    Key Latin American stock indexes and currencies:
    
                              Latest    Daily % change
 MSCI Emerging Markets         1181.51             0.22
                                        
 MSCI LatAm                    2110.45            -0.12
                                        
 Brazil Bovespa              104520.50            -0.28
                                        
 Mexico IPC                          -                -
                                        
 Chile IPSA                    3938.41            -1.03
                                        
 Argentina MerVal                    -                -
                                        
 Colombia COLCAP               1220.06                - Currencies             Latest    Daily % change
 Brazil real                    5.3931             0.42
                                        
 Mexico peso                   20.5052            -0.20
                                        
 Chile peso                      757.4            -0.50
                                        
 Colombia peso                 3650.52            -0.45
 Peru sol                       3.6198             0.05
                                        
 Argentina peso                79.5500            -0.06
 (interbank)                            
                                        
 

 (Reporting by Ambar Warrick in Bengaluru; Editing by Angus
MacSwan)
  
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