Latam currencies slip as stronger dollar weighs, stocks mixed

By Utkarsh Hathi and Purvi Agarwal

Latin American currencies largely weakened on Monday, weighed down by a stronger dollar, while stocks were mixed as investors assessed oil supply concerns and domestic political and economic developments.

MSCI's Latin American currency index (.MILA00000CUS) edged 0.34% lower, while the stocks equivalent (.MILA00000PUS) declined 0.02%.

The dollar index TVC:DXY recovered from more than two-week lows on Monday. The greenback largely lost ground after a weaker U.S. jobs data report last week prompted traders to scale back expectations of a near-term Federal Reserve interest rate hike.

Meanwhile, OPEC+ agreed to increase oil output from August and signs of increasing exports through the Strait of Hormuz weighed on oil prices.

"Latin America has seen the smallest import-price increase and historically has the weakest transmission from import prices to CPI," said analysts at Oxford Economics.

"In Latin America, subsidies, tax cuts, and price controls are also cushioning the inflation and consumption impact."

This week, many emerging market central banks are due to announce monetary policy decisions, which could set the tone for individual economies.

On Monday Chile's peso FX_IDC:USDCLP led declines, down 0.7% and on track for its sharpest intraday drop in nearly two weeks, while its stocks BCS:SP_IPSA were up 0.7%.

Colombia's peso FX_IDC:USDCOP weakened 0.4%, while local equities BVC:ICAP fell 0.6%, largely dragged down by a 3% fall in oil firm Ecopetrol BVC:ECOPETROL.

Colombian assets had rallied into late June when right-wing outsider Abelardo De La Espriella won the presidential election on hopes of market-friendly reforms.

However a smaller-than-expected victory margin raised concerns over the passage of reforms, causing a divergence between a rally in the currency and sharp losses in stocks.

De La Espriella's win cemented the narrative of a rightward shift in Latin America, which was soon followed by conservative Keiko Fujimori's victory in Peru.

Peruvian stocks (.MXNUAMPESCPGPE) gained 0.7%, and the sol FX_IDC:USDPEN was flat in light trading volumes.

Among other stocks, Brazilian equities BMFBOVESPA:IBOV slid 1.3%, while markets in Mexico BMV:ME and Argentina BCBA:IMV gained 0.7% and 1.4%, respectively.

In Brazil, Senator Flavio Bolsonaro was seeking to delay a proposed 25% U.S. tariff on Brazilian goods until after the October elections in an attempt to distance himself from the levies blamed on his camp.

The right-wing challenger's popularity has taken a hit after a report linked him to a disgraced banker and his stepmother resigned from the women's wing of his party, hurting his dwindling chances of defeating current President Luiz Inacio Lula da Silva.

Key Latin American stock indexes and currencies at 15:20 GMT