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EMERGING MARKETS-Chile peso falls the most in four months as copper drops

SAO PAULO, Sept 8 (Reuters) - The Chilean peso on Friday posted its worst daily drop in four months as traders questioned whether a rally in copper that has underpinned the currency's recent upswing was justified. The peso weakened 1.1 percent to 620 to the dollar, snapping a string of four straight days of gains but still near two-year highs. The move came on the heels of a decline in prices of copper, a key export, as traders booked profits on a 20 percent surge that began in June. Analysts have voiced skepticism that the industrial metal would continue to rise, given signs of stagnant demand from top consumer China. Chinese data for August showed imports of copper and copper products held steady for the fourth month in a row. Expectations that the Chilean central bank would react to the peso's recent strength by cutting interest rates also helped to temper those bullish on the currency, especially following weaker-than-expected August price figures. Still, some remained confident. Nomura strategists recommended clients bet that the Chilean currency would outperform the Mexican peso. "The sharp increase in copper prices could potentially front-load the country's process of investment recovery and accelerate an economic rebound," they wrote in a report. The Mexican peso slipped 0.4 percent, driven lower tensions surrounding North Korea. South Korea braced for the possibility of another missile test by North Korea on Saturday, the anniversary of its founding. It marks the occasion each year with a big display of pageantry and military hardware. Tension on the Korean peninsula has escalated as North Korea's young leader, Kim Jong Un, has stepped up the development of weapons. It has tested a string of missiles this year, including one flying over Japan, and conducted its sixth nuclear test on Sunday.

Key Latin American stock indexes and currencies at 1530 GMT:

Stock indexes daily % YTD % change change

Latest

MSCI Emerging Markets 1090.60 0.05 26.42 MSCI LatAm 2939.60 -0.47 26.18 Brazil Bovespa 73144.31 -0.37 21.45 Mexico S&P/BVM IPC 50046.29 -0.4 9.65 Chile IPSA 5095.78 -0.29 22.75 Chile IGPA 25497.71 -0.26 22.97 Argentina MerVal 23937.84 -1.29 41.49 Colombia IGBC 11227.82 -0.16 10.86 Venezuela IBC 276638.56 1.21 772.53 Currencies daily % YTD % change change

Latest

Brazil real 3.0962 0.16 4.94 Mexico peso 17.7405 -0.40 16.93 Chile peso 619.7 -1.10 8.23 Colombia peso 2908.49 -0.27 3.20 Peru sol 3.233 0.03 5.60 Argentina peso (interbank) 17.2075 -0.04 -7.74 Argentina peso (parallel) 17.78 0.28 -5.40

(Reporting by Bruno Federowski; Editing by Lisa Von Ahn)