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EMERGING MARKETS-Brazil real eyes worst week in a year amid domestic, trade worries

By Sruthi Shankar

By Sruthi Shankar Nov 8 (Reuters) - The Brazilian real was set to record its worst week in over a year on Friday, hit by underwhelming oil auctions and political concerns sparked by a Supreme Court ruling that could lead to the release of former President Luiz Inacio Lula da Silva. The real dropped about 1% to 4.1398 per dollar, adding to sharp declines this week after major global oil firms snubbed Brazil's biggest-ever pre-salt oil auction, with only the state-owned Petrobras and Chinese state firm CNODC awarded blocs. Adding to the downbeat mood, Brazil's Supreme Court decided on Thursday to end the mandatory imprisonment of convicted criminals after they lose their first appeal, overturning a rule that contributed to the success of Brazil's biggest corruption investigation, the so-called Car Wash operation. The ruling, which allows convicts to exhaust their appeal options before being locked up, could benefit dozens of high-profile prisoners, among them Lula, jailed last year for taking bribes. If and when he is released, Lula would be free to engage in politics but would not be eligible under Brazil's Clean Record law to seek elected office for eight years after his first conviction in June 2017. "Lula may have the ability to unite the left side of the political spectrum, thus increasing opposition to fiscal reforms and austerity measures," said Simon Harvey, FX analyst at Monex Europe. "Much of today's weakness can be attributed to the double whammy of poor oil auctions." Brazil's Bovespa fell 0.9%, but still was on track to the end the week higher, helped by some upbeat earnings reports and optimism over a U.S.-China trade deal. However, doubts about an agreement between Washington and Beijing to rollback tariffs imposed on each other's goods kept investors on edge. Sources familiar with the matter told Reuters the deal faces fierce internal opposition at the White House. U.S. President Donald Trump on Friday told reporters he has not agreed to roll back tariffs on China but that Beijing would like him to do so. The Mexican peso held steady, but the Chilean and the Colombian fell amid falling commodity prices. Key Latin American stock indexes and currencies at 1458 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1065.97 -0.71 MSCI LatAm 2762.61 -1.22 Brazil Bovespa 108619.22 -0.88 Mexico IPC 44041.41 -0.18 Chile IPSA 4700.69 0.6 Argentina MerVal 34976.35 -2.489 Colombia IGBC 13372.95 -0.74 Currencies Latest Daily % change Brazil real 4.1358 -1.03 Mexico peso 19.1066 0.13 Chile peso 746.1 -0.51 Colombia peso 3336.1 -0.60 Peru sol 3.3478 -0.14 Argentina peso (interbank) 59.5000 0.17 (Reporting by Sruthi Shankar in Bengaluru Editing by Alistair Bell)