Latam FX climbs, stocks rally as US rate cut bets rise on economic concerns

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By Purvi Agarwal and Ragini Mathur Most Latin American currencies strengthened against the dollar on Monday, as U.S. economic worries led to higher prospects of interest rate cuts, while some caution over tariffs remained. MSCI's index tracking Latam currencies (.MILA00000CUS) was up 0.7%, trading at its highest in over one week. Chile's peso FX_IDC:USDCLP appreciated 0.4% against the greenback, with rising copper prices also boosting the currency. Colombia's peso FX_IDC:USDCOP was up 0.6%. Colombia's global dollar-denominated bonds also rose on the day after the government offered cash to buy back maturities between 2030 and 2061. Argentina's peso FX_IDC:USDARS gained 0.4%. The International Monetary Fund lowered the bar for Argentina's reserve accumulation targets through 2026 in its $20 billion program on Friday.Brazil's real FX_IDC:USDBRL gained 0.8%, in line with peers. The country's government has set aside for now plans for direct retaliation against steep U.S. tariffs taking effect this week, focusing instead on a relief package for industries hit hardest by the levies. Brazil faces 50% tariffs on exports to the U.S., from August 7, a new deadline set by U.S. President Donald Trump last week. Trump also extended the negotiating deadline with Mexico by another 90 days last week, providing some relief to the U.S. southern neighbor. Mexican peso FX_IDC:USDMXN was the only major Latin American currency to weaken on the day, slipping 0.2% against the dollar. "If you look at the price action recently, the Mexican peso has shown particular resilience on a global scale," said Alejandro Cuadrado, global head of FX and Latam strategy at BBVA. "Continued and heavier long positioning in the peso has helped it stand out, and I think now we're seeing a bit of a catch up of the rest versus the Mexican Peso". The dollar index TVC:DXY was slightly higher on Monday, recovering some of the declines from its over 1% fall on Friday, following events that highlighted the fragility of the greenback - a dismal U.S. jobs report and the subsequent firing of a top statistics official by Trump. Also, the resignation of Federal Reserve Governor Adriana Kugler on Friday opened up room for Trump to appoint a replacement, amid strained relations with Fed Chair Jerome Powell and repeated calls for lower interest rates.This revived some bets on a September interest rate cut from t...

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