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EMERGING MARKETS-Trade deal hopes lift Latam stocks; FX pressured by dollar strength

By Medha Singh

* U.S.-China trade deal "potentially very close" - Trump * Latam FX drops against a strong dollar * Trade deal hopes bolster stocks (Updates prices; adds quote, news items) By Medha Singh Nov 22 (Reuters) - Latin American stocks advanced on Friday as positive comments from Washington and Beijing eased investor concerns at the end of a week mired by conflicting headlines on a trade deal. U.S. President Donald Trump said a trade deal with China is "potentially very close", adding to earlier optimism after Beijing had said it wanted to work out an initial agreement with Washington. MSCI's index of Latin American stocks rose 0.6%, set to wrap up a week marked by conflicting messages surround a trade deal, marginally higher. Only Chilean stocks shed 0.7%. However, currencies in the region reversed early gains to move lower as the dollar strengthened after data showed U.S. factory and services activity quickened in November. Brazil's real edged higher as the government of the biggest economy in Latin America raised its estimate of how much revenue it will take in this year, and lowered its spending forecast, an indication it was ready to tackle the country's high fiscal deficit. "Brazil's currency also had a bad week, but we doubt that this will prevent policymakers from cutting their key rate next week," said Quinn Markwith, Emerging Markets Economist at Capital Economics. The currency which dropped below the psychological level of 4.20 against the dollar on Tuesday to touch an all-time low, was set to end the holiday shortened week with modest gains. Losses for Mexico's peso were limited as data showed annual inflation accelerated slightly more than expected in the first half of November at an annual rate. Also on Friday, the country's lower house of Congress approved the 2020 budget, signing off on the spending part of the package after voting was delayed twice in as many weeks. Key Latin American stock indexes and currencies at 1855 GMT: Stock indexes daily % Latest change MSCI Emerging Markets 1046.76 0.21 MSCI LatAm 2692.78 0.59 Brazil Bovespa 107834.35 0.31 Mexico IPC 43447.53 0.44 Chile IPSA 4710.40 -0.71 Argentina MerVal 33717.96 1.415 Colombia 1603.52 0.24 Currencies daily % Latest change Brazil real 4.1855 0.16 Mexico peso 19.3885 -0.04 Chile peso 798.7 -0.46 Colombia peso 3422.75 -0.17 Peru sol 3.388 -0.47 Argentina peso (interbank) 59.7700 0.07 (Reporting by Medha Singh in Bengaluru Editing by Alistair Bell)