Latam FX weaken with focus on trade deals; Brazilian stocks slide

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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.BT...

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