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 .MILA00000CUS 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 .MILA00000PUS advanced by 1.4%, on course for its best day in over a week.
The U.S. dollar =USD 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 .MERV rose by 4%.
MSCI's index for overall EM stocks .MSCIEF 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 MXN= strengthened 0.61% on the day, while its stock exchange .MXX was up 0.38%.
In Brazil, the real BRL= appreciated by 0.8% against the dollar, while the Bovespa index .BVSP 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 .COLCAP was down 0.5% while Chile's .SPIPSA was up 1%.
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Key Latin American stock indexes and currencies:
Stock indexes | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1054.16 | 1.45 |
MSCI LatAm .MILA00000PUS | 1891.99 | 1.39 |
Brazil Bovespa .BVSP | 119294.79 | 0.24 |
Mexico IPC .MXX | 50020.47 | 0.38 |
Chile IPSA .SPIPSA | 6822.38 | 0.98 |
Argentina MerVal .MERV | 2762075.01 | 4.03 |
Colombia COLCAP .COLCAP | 1399.51 | -0.52 |
| ||
Currencies | Latest | Daily % change |
Brazil real BRL= | 6.0459 | 0.8 |
Mexico peso MXN= | 20.525 | 0.61 |
Chile peso CLP= | 1003.25 | 0.22 |
Colombia peso COP= | 4282 | 0.43 |
Peru sol PEN= | 3.772 | 0.19 |
Argentina peso (interbank) ARS=RASL | 1,040.0 | 0.00 |
Argentina peso (parallel) ARSB= | 1,220.0 | 2.4 |
(Reporting by Purvi Agarwal and Lisa Mattackal in Bengaluru
Editing by Nick Zieminski)
((Purvi.Agarwal@thomsonreuters.com;))