By Ragini Mathur, Purvi Agarwal and Shashwat Chauhan
Latin American currencies broadly weakened against the dollar on Thursday as investors assessed U.S. President remarks about Federal Reserve Chair Jerome Powell's tenure and ongoing U.S. trade developments.
The dollar index TVC:DXY advanced 0.3% after a dip on Wednesday, when reports suggested Trump was considering removing Powell. While Trump later denied the claims, he did not rule out the possibility entirely.
Wednesday's decline in the dollar led to gains for most Latin American currencies, but a reversal in the greenback on Thursday pushed them back into negative territory.
The dollar's rebound was supported by stronger U.S. retail sales data and steady weekly jobless claims, boosting the currency's performance globally.
"Today's US data is generally on the firmer side in terms of activity and jobs ... overall, it supports the view that there is little pressing need for another interest rate cut from the Federal Reserve," James Knightley, chief international economist at ING, said in a note.
Mexico's peso FX_IDC:USDMXN, which posted its biggest single-day gain in two weeks on Wednesday, declined 0.3%, while Colombia's peso FX_IDC:USDCOP fell 0.2%.
Mexican equities BMV:ME edged up 0.2%, but gains were capped by a 6.8% drop in Walmart's Mexico unit BMV:WALMEX, which reported a 10% decline in second-quarter net profit, missing analysts' expectations.
Brazil's real FX_IDC:USDBRL reversed initial losses to rise 0.4% to 5.54 per dollar.
The country's highest court upheld much of a contentious presidential decree raising the financial operations tax on Wednesday.
Brazil remains in focus after Trump imposed 50% tariffs on the country. In response, Brazilian President Luiz Inacio Lula da Silva said on Thursday that he would not take orders from a "gringo".
The Economic Commission for Latin America and the Caribbean (ECLAC) said that foreign direct investment in Latin America grew 7.1% to $188.96 billion in 2024, although new investment interest has stagnated.
MSCI's index of Latin American stocks (.MILA00000PUS) climbed 0.6%, with gains across major bourses including Brazil BMFBOVESPA:IBOV and Argentina BCBA:IMV.
Markets also monitored trade signals from Trump, who suggested being "very close" to a deal with India and indicated potential progress with Europe but remained cautious about prospects with Canada.
The U.S. has already secured agreements with the UK, China, Vietnam, and Indonesia, with other negotiations ongoing ahead of an August 1 tariff deadline.
"Mexico and emerging markets in Asia face the highest direct exposure, while other EMs will be indirectly affected through lower investment and potential weakening in global demand," said analysts at S&P Global Ratings.
Separately, the head of the International Monetary Fund's mission to Ethiopia said that the government is engaging with bondholders on potential paths to restructuring its sole international bond.
Ethiopia, which defaulted on its bond in 2023, has been in a standoff with a group of investors holding its $1 billion Eurobond (XS1151974877=TE).
Key Latin American stock indexes and currencies:
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1241.7
0.18
MSCI LatAm (.MILA00000PUS)
2282.68
0.57
Brazil Bovespa BMFBOVESPA:IBOV
135656.6
0.11
Mexico IPC BMV:ME
56639.33
0.24
Argentina Merval BCBA:IMV
2066253.02
1.92
Chile IPSA BCS:SP_IPSA
8187.22
0.43
Colombia COLCAP BVC:ICAP
1743.62
2.47
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.5478
0.37
Mexico peso FX_IDC:USDMXN
18.7637
-0.29
Chile peso FX_IDC:USDCLP
962.57
0.4
Colombia peso FX_IDC:USDCOP
4017.4
-0.18
Peru sol FX_IDC:USDPEN
3.5595
-0.41
Argentina peso (interbank) FX_IDC:USDARS
1273
-0.79
Argentina peso (parallel) (ARSB=)
1275
1.57