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EMERGING MARKETS-Latam FX hits pause as dollar gains favor

By Sruthi Shankar

(Updates market price) By Sruthi Shankar Oct 24 (Reuters) - The Brazilian real and the Mexican peso held near recent highs on Thursday as the dollar gained favor amid renewed concerns about U.S.-China trade talks and a further delay to the Brexit deal. After a recent run of gains on optimism over the final approval of Brazil's pension reforms bill, the real steadied at 4.04 per dollar. The currency had hit a two-month high of 3.99 per dollar earlier in the session. The Mexican peso pulled back 0.2%, but held near a three-month high hit earlier this week, while the Colombian peso and the Argentine peso slipped. The sentiment soured as U.S. Vice President Mike Pence accused China of curtailing "rights and liberties" in Hong Kong in a wide-ranging critique of Beijing's behavior. His closely watched speech came ahead of a new round of talks between Treasury Secretary Steven Mnuchin and Chinese officials on Friday to try to end a bruising trade dispute. Meanwhile, the dollar strengthened against the pound after Britain's Prime Minister Boris Johnson called on for a general election on Dec. 12 to break Britain's Brexit impasse, conceding for the first time he will not meet his "do or die" deadline to leave the European Union next week. Positive developments on both fronts had supported emerging market assets since early October, pushing the MSCI index of Latin American currencies and its stocks counterpart to multi-month highs. "At these levels, significant optimism has already been priced into markets. We are skeptical that the USD pullback can extend," Ben Randol, a strategist at Bank of America Merrill Lynch, wrote in a note. "Within the context of a fragile global economy, there has been lack of progress on structural policy matters needed to reduce the elevated state of global uncertainty." Brazilian markets rallied this week on expectations of a final vote by the Senate to a sweeping overhaul of the country's pension system aimed at stabilizing public finances and boosting growth. The main Bovespa index pulled back 0.4% after hitting a record high on Wednesday, with steelmaker Companhia Siderurgica Nacional sliding 7% to the bottom after reporting a quarterly net loss and cutting its 2019 profit guidance. Mexican shares steadied, helped by gains in the country's largest retailer, Walmart de Mexico on the back of a quarterly profit beat. Cement maker Cemex slumped 7% after reporting a fall in net sales. Chile's currency climbed after the central bank delivered a third major rate cut since June after the market close on Wednesday, in line with market expectations. The bank cut the benchmark interest rate by a quarter of a percentage point to 1.75% and said raging protests that have engulfed the country will have an economic impact. The Argentine peso weakened even as the central bank sold $346 million of its reserves to stem the currency's slide, three days ahead of a presidential election that has increased uncertainty over an economy already ailing from recession. Key Latin American stock indexes and currencies at 1951 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1036.33 0.52 MSCI LatAm 2788.14 0.5 Brazil Bovespa 107089.12 -0.42 Mexico IPC 43678.14 0.3 Chile IPSA 5014.95 2.13 Argentina MerVal 33293.60 1.582 Colombia IGBC 13108.12 -0.16 Currencies Latest Daily % change Brazil real 4.0405 -0.21 Mexico peso 19.1380 -0.16 Chile peso 723.8 0.28 Colombia peso 3404.05 -0.37 Peru sol 3.3478 -0.08 Argentina peso (interbank) 59.4500 -0.76 (Reporting by Sruthi Shankar and Susan Mathew in Bengaluru Editing by Paul Simao and Alistair Bell)