By Purvi Agarwal and Johann M Cherian
Latin American currencies and stocks fell on Friday after U.S. President Donald Trump announced his nominee for the Federal Reserve chair, while Colombia's central bank announced a bigger-than-expected rate hike in an effort to temper price pressures.
Trump nominated former Fed governor Kevin Warsh as his pick to head the U.S. central bank after Chair Jerome Powell's term ends in May.
Investors anticipate Warsh to be a candidate who would stop short of the aggressive policy easing associated with other candidates.
"While markets are probably relieved that a well-known, former Fed official has been nominated as the next Fed chair, they are also likely to pivot to concerns that he won't be as dovish as they were expecting the new chair to be," said Chris Zaccarelli, chief investment officer for Northlight Asset Management.
The move supported the dollar index TVC:DXY, that has been trading around four-year lows this week, consequentially weakening currencies in emerging markets, including Latin America.
MSCI's index tracking stocks in the region (.MILA00000PUS) fell 2%, and the currency equivalent (.MILA00000CUS) lost 0.4%.
Still, a rally earlier in the month had the equities index on track to log its biggest monthly jump since November 2020, while the currencies gauge was set for its largest gains since June 2025.
Colombia's central bank raised its benchmark interest rate by 100 basis points to 10.25%, its first hike since 2023, as policymakers pointed to rising inflation pressures, a jump in inflation expectations and mounting fiscal and external risks.
The surprise move arrives months ahead of crucial elections in the country that stands in the face of a right-wing tide in Latin America.
Colombia's peso FX_IDC:USDCOP depreciated 1.3% and the equities index BVC:ICAP lost 0.5% in tandem with broader losses.
Dollar strength and profit booking sparked a selloff in commodities, including base and precious metals and weighed on assets in resources-rich Latam. A 30% slide in silver prices was the steepest one-day fall for the precious metal.
Brazil's real FX_IDC:USDBRL weakened 1% against the greenback. Currencies of copper producers Chile FX_IDC:USDCLP and Peru FX_IDC:USDPEN fell 1.4% and 0.7%, respectively, while Mexico's peso FX_IDC:USDMXN lost 1.1%.
On the equities front, mining giants Brazil's Vale BMFBOVESPA:VALE3 lost 2.8%, Chile's SQM BCS:SQM_A fell 3.5%, while Mexico's Grupo Mexico BMV:GMEXICO/B and Industrias Penoles BMV:PE_OLES dropped 5% and 12%, respectively.
Ukraine bonds rallied over 1 cent on the dollar each, with the one maturing in 2035 (XS2895056369=TE) up 1.2 cents amid a week-long halt on airstrikes on Ukraine ahead of the weekend where more talks are expected between the warring countries.
Ethiopia will renegotiate a deal to restructure its $1 billion international bond after the country's official creditors, including China and France, said a proposed agreement was inadequate.
The bond, maturing in 2035 (XS1151974877=TE), fell 1.5 cents on the dollar.
The heads of Indonesia's financial regulator and stock exchange resigned suddenly in a shake-up that followed this week's $80 billion stock market rout and mounting concerns over transparency and governance.
The index IDX:COMPOSITE closed 1.2% higher after falling over 8% in the last two sessions.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1526.46
-1.82
MSCI LatAm (.MILA00000PUS)
3124.71
-2.05
Brazil Bovespa BMFBOVESPA:IBOV
181398.63
-0.95
Mexico IPC BMV:ME
67880.1
-2.32
Chile IPSA BCS:SP_IPSA
11420.07
-0.9
Argentina Merval BCBA:IMV
3203372.65
-0.245
Colombia COLCAP BVC:ICAP
2479.87
-0.54
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.2451
-1.07
Mexico peso FX_IDC:USDMXN
17.4111
-1.13
Chile peso FX_IDC:USDCLP
871.11
-1.39
Colombia peso FX_IDC:USDCOP
3672.5
-1.27
Peru sol FX_IDC:USDPEN
3.3671
-0.72
Argentina peso (interbank) FX_IDC:USDARS
1446.5
-0.14
Argentina peso (parallel) (ARSB=)
1450
1.72