LatAm FX, stocks broadly lower as dollar firms, Mideast risks weigh

By Utkarsh Hathi, Ragini Mathur and Purvi Agarwal

Latin American stocks and currencies opened the new quarter lower on Wednesday, pressured by a firmer dollar, while investors assessed U.S.-Iran talks and the U.S. decision to not renew an existing North America trade agreement.

MSCI's regional currency index (.MILA00000CUS) edged 0.5% lower, pulling back after notching a sixth consecutive quarterly gain in the previous session. The equivalent stocks gauge (.MILA00000PUS) declined 0.4%.

Vice President JD Vance said discussions were going well as the U.S. and Iran held indirect talks in Doha and that Washington would not return to full combat unless necessary.

However, uncertainty remained as complex issues such as Iran's nuclear programme were unsolved. Though crude prices remain near pre-conflict levels and have eased fears of an energy supply disruption, many central bank policymakers have warned of prolonged risks to global economies.

Federal Reserve Chair Kevin Warsh, at the European Central Bank's Sintra conference, reiterated his stance of not providing guidance on monetary policy, amid bets on at least one 25-basis-point interest rate hike by end-2026, according to LSEG-compiled data.

The dollar benefited from those expectations, starting the month on a stronger note after logging its best monthly performance in about a year in June.

Meanwhile, the U.S. administration declined to extend the USMCA — the existing North America trade agreement — starting a decade-long clock to wind down the trade deal as it seeks changes to try to reshore manufacturing jobs.

"For Canada and Mexico, uncertainty will likely continue to weigh on net exports, dampen investment, and generate FX volatility," said analysts at BofA Global Research.

"Despite volatility, we still see it as unlikely that the Bank of Canada or Banxico hike rates this year."

Mexican stocks BMV:ME reversed earlier declines to add 0.5%, while the peso FX_IDC:USDMXN weakened 0.4%.

Brazil's real FX_IDC:USDBRL slipped 1%, while the Bovespa stock index BMFBOVESPA:IBOV fell 0.1%.

Manufacturing activity in Brazil, the region's largest economy, expanded in June, data showed.

"We have to see more positive data in coming weeks and months to confirm that there is a sustained recovery," said Andres Abadia, chief Latin America economist at Pantheon Macroeconomics.

"The main issue in Brazil is still very tight monetary policy, and you have to couple that to political uncertainty due to the presidential election that is nearing."

Brazil is due to hold general elections in October this year, keeping political risk firmly on investors' radar.

U.S. Secretary of State Marco Rubio on Tuesday congratulated conservative Keiko Fujimori on winning Peru's presidential election, saying the Trump administration looked forward to deepening cooperation with her government.

Peru, along with Colombia, was among the latest countries in the region to shift rightward. Assets in both countries had benefited from expectations of more market-friendly governments taking power.

Peru's monthly consumer prices rose 0.23% in June, following a 0.16% decline in May.

Equities in Peru (.MXNUAMPESCPGPE) rose 0.6%, while the sol FX_IDC:USDPEN was flat.

Colombia's COLCAP index BVC:ICAP fell 0.6%, and the peso FX_IDC:USDCOP appreciated 1.1%.

Chile's economic activity declined in May, central bank data showed, missing market forecasts and falling for a fifth consecutive month, dragged down by weakness in the key mining sector of the world's largest copper producer.

Key Latin American stock indexes and currencies: