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* Brazil's retail sales drop far less than expected in March * Latam FX set for best week this year * U.S. jobs growth slows in April; dollar falls (Adds details on EMFX, updates comment) By Ambar Warrick and Shashank Nayar May 7 (Reuters) - Latin American stocks and currencies gained on Friday and were set for large weekly gains as weak U.S. payrolls data pushed the dollar to a more than two-month low, which helped emerging market currencies scale record highs. MSCI's index of Latin American currencies rose 0.9% to a near four-month high and was set for its best week since November. Between a weakening dollar, subdued U.S. Treasury yields, and improving risk sentiment, the MSCI's index of emerging market (EM) currencies surged 0.7% to a record high, even as several countries grapple with a damaging wave of COVID-19 infections. "EM has been extremely resilient during this shock - last year there were five sovereign defaults and in the majority of those cases there were pre-existing credit issues," Lupin Rahman, head of EM sovereign credit at PIMCO told the Reuters Global Markets Forum. "This year higher commodity prices as well the International Monetary Fund’s Special Drawing Rights allocation will allow many countries much-needed liquidity." The dollar index fell 0.8% to a more than two-month low after payrolls data showed U.S. job growth unexpectedly slowed in April. In Latam, Brazil's real rose 1% to a near four-month high after retail sales volumes fell 0.6% in March from February, far less than the 7.0% decline forecast by a Reuters poll of economists. The real was set for its best week this year after the Brazilian central bank hiked rates on Wednesday, and flagged more strong hikes to help curb rising inflation. The Mexican peso gained 0.7%, taking support from copper prices even as annual inflation picked up faster than expected in April to its highest level in more than three years and moved well above the central bank's target level. The currency of the world's top copper producer Chile gained 1.4% as copper prices surged to record highs, while a trade surplus of $2.040 billion in April further helped sentiment. However, gains in the peso were limited as Chile's lower house of Congress approved a bill that would slap a progressive royalty on sales of copper as prices rise. Peru's sol added 0.2% on strength in copper prices. Colombia's peso was the top performer in Latam on Friday, surging 1.4% as anti-government protests appeared to be calmer after nine days of unrest. The MSCI's index of Latam stocks jumped nearly 2%, and was set for its best week in three months. Key Latin American stock indexes and currencies: Latest Daily % change MSCI Emerging Markets 1350.66 0.74 MSCI LatAm 2505.43 1.9 Brazil Bovespa 121251.49 1.11 Mexico IPC 49227.46 0.6 Chile IPSA 4618.21 -0.27 Argentina MerVal 51167.53 3.6 Colombia COLCAP 1280.97 1.14 Currencies Latest Daily % change Brazil real 5.2250 1.01 Mexico peso 19.9287 0.65 Chile peso 695.3 0.63 Colombia peso 3747.38 1.44 Peru sol 3.81 0.16 Argentina peso 93.8300 -0.03 (interbank) (Reporting by Ambar Warrick and Shashank Nayar in Bengaluru; Additional reporting by Aaron Saldanha; Editing by Andrea Ricci)