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EMERGING MARKETS-Brazil's Bovespa hits record high amid New Year optimism

SAO PAULO, Jan 4 (Reuters) - Brazil's benchmark Bovespa index led gains among its Latin American peers amid a bullish day in the region, hitting all-time highs, as domestic and international investors showed optimism about the nation's general direction at the start of the year. Investors' eyes are currently focused on a number of political developments in Latin America's largest economy, such as a corruption trial for leftist ex-president Luiz Inacio Lula da Silva at the end of January. Should a conviction against the popular former leader be upheld, he would barred from running in October presidential elections, which would please investors who widely seem him as the left's best chance of winning. In recent days, the cabinet of conservative President Michel Temer has accelerated a reshuffle, as multiple cabinet members prepare to run for Congress in the coming elections.

"Political maneuvering accelerated and a strong inflow of foreign investors is supporting a stock market rally at the beginning of 2018," analysts at Guide Investimentos wrote in a note to clients. The Bovespa climbed 1.31 percent in afternoon trading, hitting intraday record highs for the second straight session, and the index looked on track to book its ninth straight trading day in the black. The worst performing major market in the region was Argentina, where investors began booking gains after 11 straight bull sessions. The Merval equities index had ticked up a relatively modest 0.33 percent after lingering in the red for much of the day, while the country's peso currency had fallen 0.78 percent. Analysts said there were lingering jitters in the market over the Argentine central bank's decision in late December to ease the official inflation target for 2018. "Monetary policy continues to be a focus of uncertainty, even after the change in the inflation target to 15 percent annually was made official," analysts at Delphos Investment wrote.

Key Latin American stock indexes and currencies at 1708 GMT:

Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1193,10 0,75 2,22 MSCI LatAm 2969,57 1,75 3,2 Brazil Bovespa 79018,61 1,31 3,42 Mexico S&P/BVM IPC 50006,27 0,45 1,32 Chile IPSA 5637,27 0,37 1,31 Chile IGPA 28323,21 0,34 1,22 Argentina MerVal 31579,39 0,33 5,03 Colombia IGBC 11678,74 1,02 2,71 Venezuela IBC 1263,67 0,14 -96,01 Currencies daily % YTD % change change

Latest

Brazil real 3,2247 0,32 0,76 Mexico peso 19,2450 0,52 7,79 Chile peso 604,9 0,31 10,88 Colombia peso 2887,92 0,48 3,93 Peru sol 3,202 0,47 6,62 Argentina peso (interbank) 18,6050 -0,78 -14,67 Argentina peso (parallel) 19,33 -0,21 -12,98

(Reporting by Gram Slattery; Editing by Bernadette Baum)