Home hero Loeb - who is on the brink of clinching his ninth and probably final World Rally title - made an early break when he won the opening Hohlandsbourg-Firstplan stage with a time 7.6 seconds faster than third-quickest Latvala.
But Latvala was within 0.8s of Loeb on Vallee de Munster, taking him past Mikko Hirvonen for second, and then pipped Loeb by a tenth on Soultzeren-Pays Welche, leaving the Citroen and Ford 7.5s apart at the end of the loop.
After going quickest on Thursday's superspecial, Thierry Neuville immediately dropped back to sixth with a poor time on Friday's opener.
The Citroen Junior driver then fought back - going third quickest on SS3 and fourth on SS4 to recover to fourth. Neuville is now just 1.5s behind third-placed works Citroen man Hirvonen.
Dani Sordo's Prodrive Mini is on Neuville's tail in fourth, a couple of seconds ahead of Petter Solberg in the second Ford.
Satellite Ford men Mads Ostberg, Ott Tanak and Evgeny Novikov are next up, with Chris Atkinson fending off newcomer Sebastien Chardonnet for 10th by just one second.
- Thierry Neuville
- Mikko Hirvonen