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EMERGING MARKETS-Latam FX hit one-month high as yields ease
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EMERGING MARKETS-Latam FX hit one-month high as yields ease
Jan 14, 2025 12:11 PM

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Mexico president might avoid Trump tariffs

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MSCI EM stocks index set for best day since October

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MSCI Latam FX up 1.04%, stocks gain 1.4%

(Updates to mid-session trading)

By Purvi Agarwal and Pranav Kashyap

Jan 14 (Reuters) -

An index tracking Latin American currencies touched a

one-month high on Tuesday, as U.S. Treasury yields and eased and

the dollar stabilized, while investors remained focused on the

Federal Reserve's potential rate cuts and the prospects of

aggressive U.S. tariffs.

The MSCI index for Latin American currencies

had climbed 1% touching its highest since Dec.

13 and setting its sights on its best daily performance in

nearly a month.

Meanwhile, the index for regional stocks

advanced by 1.4%, on course for its best day in over a week.

The U.S. dollar slipped 0.2%.

In Argentina, a

report

showed its monthly inflation rate stood at 2.7% in

December, in line with analyst estimates. It's inflation in the

12 months through December was 117.8%. The Merval stock exchange

rose by 4%.

MSCI's index for overall EM stocks surged 1.4%,

heading for its strongest day since October.

The retreat in Treasury bond yields and the dollar's

steadiness came on the heels of a report suggesting Trump's team

might gradually increase tariffs to prevent inflation surges. A

cooler-than-expected U.S.

producer prices report

also contributed to the calmer market mood.

Latin American assets have been under strain since Donald

Trump's reelection in November, with fears of tariffs and

inflation driving the dollar higher.

In the latest tariff-related development, Trump announced

plans to establish a new department, the External Revenue

Service, "to collect tariffs, duties, and all revenue" from

foreign sources.

The pressure on Latin American assets intensified, with

central banks stepping into foreign exchange markets to

stabilize their currencies, following Trump's pledge to impose

hefty tariffs on the U.S.'s top trading partners - Canada,

Mexico, and China.

This included a proposed 25% tariff on imports from

Canada and Mexico, aimed at curbing drugs and migrant flows

across borders.

"Mexico is better positioned to negotiate with Trump,"

said Jason Tuvey, deputy chief emerging markets economist at

Capital Economics.

"Mexico's economic ties to the U.S. are now even larger

and so it may be able to lobby harder against the imposition of

tariffs,".

Mexican president Claudia Sheinbaum's intensified actions on

immigration and tariffs have left open the possibility the

impacts could be less severe than anticipated.

The Mexican peso strengthened 0.61% on the day, while

its stock exchange was up 0.38%.

In Brazil, the real appreciated by 0.8% against the

dollar, while the Bovespa index rose 0.24%.

U.S. consumer price data, due Wednesday, will be the next

major data release that could direct the near-term path for EM

assets.

Most other LatAm currencies saw slight gains against the

greenback. The main stock index in Colombia was down

0.5% while Chile's was up 1%.

Highlights:

** Romania has to cut spending after junk rating 'wake-up

call', debt chief says

Key Latin American stock indexes and currencies:

Stock

indexes Latest Daily % change

MSCI Emerging Markets 1054.16 1.45

MSCI LatAm 1891.99 1.39

Brazil Bovespa 119294.79 0.24

Mexico IPC 50020.47 0.38

Chile IPSA 6822.38 0.98

Argentina MerVal 2762075.01 4.03

Colombia COLCAP 1399.51 -0.52

Currencies Latest Daily % change

Brazil real 6.0459 0.8

Mexico peso 20.525 0.61

Chile peso 1003.25 0.22

Colombia peso 4282 0.43

Peru sol 3.772 0.19

Argentina peso 1,040.0 0.00

(interbank)

Argentina peso 1,220.0 2.4

(parallel)

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