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this might sound like a dumb question, but do you have to hold on to any of the letters found during the game?

Mostly, no. I just read and chuck 'em in a container in my home base at the Friendly Arm Inn, for the memories. Although iirc there's at least one letter-type item needs to be in your inventory to access an area: (spoiler)

an invitation-type letter to access the Duchal Palace in Chapter 7

There may be others. Any letter(s) that you should keep in your inventory should be obvious, iirc. The ones like the bounty notices I like to keep stored away, so I can pull 'em out to remind me what punks I smoked during my ventures, yeah!

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