By Purvi Agarwal, Ankita Yadav and Ragini Mathur
Most Latin American currencies weakened against a stronger dollar on Monday, as attention turned to the August 1 deadline for U.S. tariffs, while Brazil's Bovespa index hit a three-month low, weighed by a slide in financial stocks.
The MSCI's Latin American currency index (.MILA00000CUS) slid 1% and was on track for its steepest single-day decline in over two weeks, pressured by a spike in the U.S. dollar after the United States secured a long-awaited agreement with the European Union.
In Latin America, the focus remains on the region's two largest economies – Brazil and Mexico – which are scrambling to finalize agreements with Washington before Friday's deadline, when new U.S. levies threatened by President Donald Trump are set to take effect.
Brazil's real FX_IDC:USDBRL declined 0.5% to a one-week low, while Mexico's peso FX_IDC:USDMXN weakened 1.3%, on course for its biggest daily drop since early April.
Despite Monday's losses, the regional currency index has delivered gains of 17% this year, largely benefiting from dollar weakness driven by uncertainty surrounding Trump's trade policies.
"Over the past three to four months, the dominant theme has been a softer dollar and Latam currencies offered relatively high yields globally, which is the primary reason they've all performed exceptionally well," said Chris Turner, global head of financial market research at ING.
"This quarter, however, the dollar could move just a little bit higher, with the idea that the Federal Reserve won't cut in September."
Chile's peso FX_IDC:USDCLP declined 0.5%, while the local stock index BCS:SP_IPSA fell 1.6%. The country, the world's largest copper exporter, expects U.S. tariffs on the red metal to be discussed within broader trade talks in Washington this week, Finance Minister Mario Marcel said.
On the equities front, MSCI's Latin American stock index (.MILA00000PUS) dropped 1.8%, reaching its lowest level in more than seven weeks, weighed down by Brazilian equities BMFBOVESPA:IBOV.
Financial stocks saw sharp declines, with Brasil Bolsa Balcao BMFBOVESPA:IBOV plunging 3.1%, Itau Unibanco BMFBOVESPA:ITUB3 falling 2.7% and Itausa SA BMFBOVESPA:ITSA3 losing 2.3%.
The selloff followed Brazil's central bank data showing elevated interest rates slowed credit growth in June and pushed default rates to their highest levels since 2018.
BTG Pactual BMFBOVESPA:BPAC3 slid 2.2% after the lender said it would acquire UK-based HSBC's LSE:HSBA operations in Uruguay for $175 million.
Meanwhile, Argentine stocks BCBA:IMV gained 0.9%, and dollar bonds maturing in 2029 (040114HX1=1M) and 2038 (040114HU7=1M) rose over 1 cent each on the dollar, buoyed by a government move to lower export taxes on key agricultural goods and expectations of an imminent cash disbursement from the International Monetary Fund.
Investors are also awaiting central bank meetings in the U.S., Brazil, Chile, and Colombia, alongside key economic data in the U.S. this week.
Elsewhere, Trump set a new 10-12 day deadline for Russia regarding its war in Ukraine. Earlier this month, Trump had floated "very severe tariffs" on Russia if there was no peace deal with Ukraine within 50 days.
Russia's rouble RUS:USDRUB_SPT fell over 2.4% against the dollar, over-the-counter market data showed, hitting an 11-week low.
Key Latin American stock indexes and currencies:
Latin American market prices from Reuters
Equities
Latest
Daily % change
MSCI Emerging Markets CBOE:EFS
1252.58
-0.41
MSCI LatAm (.MILA00000PUS)
2224.09
-1.85
Brazil Bovespa BMFBOVESPA:IBOV
131882.93
-1.23
Mexico IPC BMV:ME
57074.59
-0.43
Chile IPSA BCS:SP_IPSA
8088.06
-1.63
Argentina Merval BCBA:IMV
2217032.11
0.907
Colombia COLCAP BVC:ICAP
1758.45
2.88
Currencies
Latest
Daily % change
Brazil real FX_IDC:USDBRL
5.592
-0.52
Mexico peso FX_IDC:USDMXN
18.7567
-1.27
Chile peso FX_IDC:USDCLP
967.88
-0.48
Colombia peso FX_IDC:USDCOP
4172.5
-0.89
Peru sol FX_IDC:USDPEN
3.543
0.03
Argentina peso (interbank) FX_IDC:USDARS
1293
-0.86
Argentina peso (parallel) (ARSB=)
1300
1.14