* Brazilian real still set for weekly rise * Mexican peso up after retail sales rise for fourth month * Morgan Stanley bullish on emerging FX and sovereign credit * EM stocks see biggest inflows in 6 weeks - BofA flows data (Updates prices throughout) By Shreyashi Sanyal Oct 23 (Reuters) - Brazil's real lost ground on Friday after a weak reading on consumer confidence, although Latin American currencies were still set to end the week higher as the dollar headed for a weekly loss. The Brazilian real fell 0.5% after a survey showed consumer confidence fell in October for the first time in six months, suggesting the economy's recovery may be losing steam. The real is still set for a weekly gain of 0.9%. Emerging markets FX strategists at Citigroup said October's consumer confidence was still below pre-COVID-19 levels and now expect Brazil's fourth quarter GDP growth to show a significant deceleration following the robust expansion in the third quarter. The MSCI's index for Latin American currencies is set for a weekly rise of 0.7%, with pesos of Chile and Colombia outperforming peers, to rise about 2% each for the week. A weakening dollar, heading for a weekly decline following the final U.S. presidential debate, has helped boost demand for riskier assets. Investors are now bracing for the Nov. 3 U.S. presidential election, with analysts pointing to a Democratic victory as a more favorable outcome for emerging markets. Morgan Stanley said it was time to ramp up exposure to emerging market currencies and hard-currency sovereign debt, with a shift of focus to the vaccine trade after the U.S. election potentially giving developing assets a boost. Emerging market stocks saw inflows of $2.7 billion, the largest in six weeks, while emerging market debt saw strong inflows of $2.2 billion, Bank of America said in a note on Friday, citing EPFR data. Investors piled in to EM equities and bonds in the week to Oct. 21. The International Monetary Fund last week revised up its forecast for the global economy but warned that the outlook was worsening for many emerging markets. Mexico's peso rose 0.4% against the dollar after data showed retail sales rose in August by 2.5% from July, the fourth monthly increase in a row, as consumer spending continues to recover from the effects of the coronavirus pandemic. Argentina's peso weakened. The country's economy minister Martin Guzman vowed to maintain a slow rate of currency devaluation despite rising pressure on the peso and tumbling foreign reserves. Argentine bondholder groups slammed the government on Thursday over economic policies they said were undermining investor confidence in the country, which emerged from a sovereign default in September after a $65 billion restructuring. Key Latin American stock indexes and currencies at 1851 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1136.38 -0.01 MSCI LatAm 1969.27 -0.6 Brazil Bovespa 101477.57 -0.43 Mexico IPC 38754.37 0.26 Chile IPSA 3801.67 -0.25 Argentina MerVal 51625.17 -0.09 Colombia COLCAP 1171.27 -0.56 Currencies Latest Daily % change Brazil real 5.6199 -0.49 Mexico peso 20.8480 0.48 Chile peso 776.6 0.30 Colombia peso 3787.5 -0.15 Peru sol 3.5967 0.14 Argentina peso (interbank) 78.1200 -0.06 Argentina peso (parallel) 191 -0.52 (Reporting by Shreyashi Sanyal in Bengaluru Editing by Chizu Nomiyama and Tom Brown)
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