Emerging Markets-LatAm assets rally as weaker dollar, commodities fuel weekly gains

Higher commodity prices provided an additional boost to the regional markets. Oil prices held near $95 per barrel amid the impasse in U.S.-Iran talks, with Tehran vowing a "devastating" response to any new threats from Washington. Brazil's benchmark rose 1.9%, the most in a month, while the real also gained 1.2% following sharp losses last week. Markets are focused on the country's fiscal health and political uncertainty ahead of October's presidential elections, with recent polls showing Luiz Inacio Lula da Silva leading right-wing Senator Flavio Bolsonaro. "We need to see what type of programs the future president will bring into the equation," Chopra said, adding that investors were likely to remain focused on "real rates staying quite high in Brazil." Lula discussed the recently imposed tariffs by U.S. with President Donald Trump on Friday, who suggested officials from both countries meet as soon as possible. Mexican stocks rose 2.4%, the most in more than two months, with miner Grupo Mexico climbing 6%, tracking higher copper prices. Colombian benchmark gained 0.9%, while its currency rose 1%, hovering near its strongest level since 2018. While data earlier this week showed the Colombian economy expanded in the second quarter, concerns over the fiscal deficit linger as the country aims to recover from the losses driven by the recent earthquake. "While spending is necessary for reconstruction, it is likely to make the new government's efforts to rein in the budget deficit even more challenging," said Kimberley Sperrfechter, senior emerging markets economist at Capital Economics. Latin American stocks were set for their strongest week in two months and currencies for their biggest weekly gain in more than four months, as persistent U.S. dollar weakness and higher commodity prices buoyed demand for regional assets. The MSCI Latin America equities index climbed 2.9%, while the regional currency gauge gained 0.7%. Regional assets rebounded, drawing support from a weaker U.S. dollar that slipped to a three-month low this week as investors grappled with U.S. long-term Treasury yields reaching multi-decade highs over fears of prolonged inflation. Latin American markets were under pressure last week, weighed down by the rotation towards tech-heavy Asian bourses and Brazil's fiscal outlook ahead of October's elections. Some investors, however, see the region's broader shift toward centre-right political leadership as supportive. "We've actually seen a pretty constructive story across the LatAm countries. You've seen a movement much more towards sort of center-right candidates. And I think that has been viewed positively by the market," said Rohit Chopra, portfolio manager, emerging markets equity at Lazard Asset Management. Though Chopra cautioned that higher U.S. long-term debt yields could increase the cost of capital for emerging markets. Investors will turn to the Federal Reserve chair's remarks next week at its annual conference for clues on the interest-rate outlook.

Emerging Markets-LatAm assets rally as weaker dollar, commodities fuel weekly gains

Brazil, Mexico and Colombia lead regional moves

Latin American assets gain on dollar weakness and commodities

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