Latin America assets recover as dollar weakens on Fed rate rethink

By Ragini Mathur and Purvi Agarwal

Most Latin American currencies extended gains on Friday and stocks were mixed, a day after weaker-than-expected U.S. jobs data cooled bets on a near-term Federal Reserve rate hike and boosted risk sentiment heading into the weekend.

MSCI's Latin American equity index (.MILA00000PUS) gained 0.6%, while its regional currency gauge (.MILA00000CUS) edged 0.3% higher. Both were on track for marginal gains in the first week of the third quarter.

The currency index had already notched its sixth straight quarterly advance — its longest winning streak since 2009.

After a shaky start to the month, markets regained footing following Thursday's soft U.S. labor-market report, after which expectations of an imminent Fed rate hike waned. Some investors see a good chance the U.S. central bank will keep rates on hold until October.

The dollar TVC:DXY was marginally lower on Friday and headed for its biggest weekly loss in 12 weeks.

"It will ultimately be up to the inflation data to determine whether that shift continues. ...We could see the U.S. dollar consolidate its latest gains, with limited upside for gold and major currencies in the coming days," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

PERU SHIFTS TO THE RIGHT

Conservative Keiko Fujimori was officially declared the winner of Peru's presidential race by the country's electoral office after weeks of reviewing contested ballots, protests and accusations of fraud in a razor-thin race.

Moody's said on Thursday it expects Fujimori to bolster investor confidence and preserve policy continuity. The ratings agency said political risks were likely to ease, though polarization and a fragmented Congress could still weigh on Peru's stable credit profile.

Peru stocks rose last month on investor expectations that Fujimori would be market-friendly and a potential close ally of U.S. President Donald Trump. In Colombia also, assets rallied heading into elections that were won by right-wing Abelardo De La Espriella.

Lima's stock exchange (.MXNUAMPESCPGPE) was on track for a weekly gain after rising 4.1% in June and 8% in the second quarter.

Meanwhile, the Trump administration on Wednesday declined to extend the U.S.-Mexico-Canada Agreement, triggering a 10-year countdown to the trade pact's expiration as Washington seeks changes aimed at reshoring manufacturing jobs.

"This is negative for Mexico, increasing the uncertainty of returns from long-term foreign direct investment in manufacturing," said Hasnain Malik, head of geopolitical risk and EM equity strategy research at Tellimer.

"However, the manner in which the U.S. has not renewed is much less disruptive than it might have been — i.e. the worst-case scenario of a clean break-up of USMCA has been avoided."

Mexican stocks BMV:ME were on track for a third consecutive weekly loss, while the peso FX_IDC:USDMXN was poised for a marginal weekly gain. The currency was the only one lower among peers on Friday.

In Colombia, minutes from the central bank's latest meeting were due later in the day. The bank raised its benchmark interest rate on Tuesday to 12%, extending a tightening cycle launched in January.

The country's stocks <.COLCAP> gained 1%, while the peso FX_IDC:USDCOP was flat. The Colombian peso was on track for its seventh straight weekly gain, marking its longest winning streak since September 2025, and its steepest weekly climb since January 2025.

Trading volumes are expected to be thin due to the U.S. Independence Day holiday.

Key Latin American stock indexes and currencies: