Latin America stocks, FX head for weekly gains as dollar weakens on Fed rate rethink

By Ragini Mathur

Most Latin American stocks and currencies extended gains on Friday, as 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 0.7%, while its regional currency gauge (.MILA00000CUS) edged 0.4% higher. Both were on track for modest 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, which dampened expectations of an imminent Fed hike and raised the chances that policymakers 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.

MEXICO IN FOCUS

Mexico remained in focus after 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. Both were slightly lower on Friday.

In Peru, Moody's said it expects President-elect Keiko 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.

Investor expectations that Fujimori, a conservative candidate, would be market-friendly and a potential close ally of the U.S. administration, helped lift Peruvian stocks last month, when she led the presidential race by a narrow margin.

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

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 to curb inflationary pressures amid tensions with the government over higher borrowing costs.

The country's stocks gained 0.9%, 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.

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

Key Latin American stock indexes and currencies at 1513 GMT: