Emerging markets-Latam FX, stocks mixed as investors weigh soft dollar, Middle East escalation

Oil prices rose more than 2% after the U.S. attacked an Iranian island in the Strait of Hormuz and Tehran said it had retaliated. The rally supported assets in the region's oil-producing economies but also pushed global bond yields higher, reviving inflation concerns. The Latin American stock index `.MILA00000PUS` added 0.7%, but was still headed for monthly losses. Latin American currencies and stocks were mixed on Monday as a softer U.S. dollar offered some support, while military escalations in the Middle East drove oil prices and global bond yields higher, renewing global inflation concerns. MSCI's Latin American currency index `.MILA00000CUS` rose 0.2%, remaining on track for a subdued monthly performance. Support from a broadly softer U.S. dollar through August was offset by the region's underperformance against AI-driven emerging-market peers and renewed geopolitical uncertainty. On Monday, the dollar index `=USD`, which tracks the greenback against six major currencies, eased 0.2% as traders awaited key U.S. jobs data later this week ahead of the Federal Reserve's September policy decision. The dollar has regained some ground late last week after expectations of a September Fed rate hike increased. Fed Chair Kevin Warsh said on Friday that policymakers would "have work to do" if inflation failed to return to the central bank's 2% target, signaling that further tightening could be needed. "Our base case remains that steady progress in underlying inflation will allow the Fed to keep rates unchanged this year," said UBS analysts in a note. "Although the risk of a September hike has increased, the latest sequential inflation data remain consistent with further disinflation." In [Brazil](https://www.reuters.com/world/brazil/), equities `.BVSP` jumped 1% and were on track to clock in their ninth straight day of gains, with oil giant Petrobras `PETR4.SA` the biggest boost on the benchmark index, up 3%. Central bank data showed the nation's gross debt as a share of gross domestic product rose to 82.5% in July from 81.9% a month earlier. Against this backdrop, Brazilian Vice President Geraldo Alckmin said the country has room both to restrain public spending and accelerate economic growth, arguing that such a combination would help reduce the debt-to-GDP ratio. "The significant rise in public debt continues to stand out," XP economist Tiago Sbardelotto said, noting that gross debt reached its highest level since April 2021 while net debt hit a record high. The country's Finance Minister Dario Durigan said that some social programs could eventually cease to be mandatory expenditures, a move he said would give policymakers greater flexibility in managing the federal budget. The real `BRL=` rose 0.2%. Colombia's peso `COP=` extended Friday's sharp decline after the country's budget bill pointed to a much wider-than-expected deficit for 2026 and 2027. The currency was on track for its worst month since July 2025, while Bogota stocks `.COLCAP` rose 0.9%. Chile's peso `CLP=` weakened 0.5%, while the country's stock benchmark `.SPIPSA` fell 1.1% after data showed copper output dropped 9.4% year-on-year in July, hit by severe storms in mining regions. Argentina's Merval index `.MERV` rose 2.5%, but remained on track for its steepest monthly decline since February.

Emerging markets-Latam FX, stocks mixed as investors weigh soft dollar, Middle East escalation

Oil rally boosts some markets while lifting inflation worries

LatAm assets mixed as softer dollar meets Middle East tensions

Brazil advances on Petrobras strength; Colombia and Chile weaken

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