Latin American currencies edged higher on Monday, lifted by a weaker U.S. dollar and strengthening commodity prices, even as regional stock markets traded flat to lower.
The MSCI index of regional equities .MILA00000PUS was down 0.1%.
Meanwhile, a gauge of Latin American currencies .MILA00000CUS climbed 0.4%, clawing back some of last week's losses.
Currencies started the week on firmer footing after a string of soft U.S. economic data last week led investors to pare back bets on an imminent Fed rate hike, dragging the dollar =USD lower for a third straight session on Monday, down 0.1%.
Still, gains across Latin American assets remained modest, as a rotation to tech-heavy emerging Asian markets has so far done little to lift the region's commodity-driven bourses.
Some analysts, however, argue that Latin American stocks could benefit if enthusiasm around artificial intelligence cools. Regional currencies, meanwhile, may find further support should the Fed adopt a less hawkish tone, bolstering the appeal of carry trades tied to the region.
"As U.S. data moderate further in the coming months, we would expect Fed members to signal comfort with keeping policy rates unchanged, which should lead to broader USD weakening," UBS analysts wrote in a note.
"While there may be limited scope for directional moves in major currencies in the near term, in our view, we continue to see potential carry and yield pickup opportunities."
Commodities lend support to resource-driven markets
Elsewhere, firmer commodity prices helped prop up resource-driven markets. Oil prices ticked higher due to stalled diplomatic efforts to defuse the Iran conflict, after Iranian Foreign Minister Abbas Araqchi said over the weekend that Tehran had yet to decide on resuming talks with Washington.
Colombia, a major oil exporter, saw its stock index .COLCAP gain 0.8%, while the peso COP= strengthened 0.3% against the dollar. The World Bank said last week it had disbursed $200 million to help Colombia respond to a deadly August 10 earthquake that left hundreds dead.
Rising gold prices lifted Peru's sol PEN= by 0.2%. GOL/
Key Latin American stock indexes and currencies at 15:04 GMT:
Stock indexes
Latest
Daily % change
MSCI Emerging Markets .MSCIEF
1709.55
0.49
MSCI LatAm .MILA00000PUS
2942.87
-0.08
Brazil Bovespa .BVSP
166640.62
-0.18
Mexico IPC .MXX
64234.93
-0.25
Chile IPSA .SPIPSA
11054.44
0.11
Argentina MerVal .MERV
2947349.15
-1.77
Colombia COLCAP .COLCAP
2452.46
0.84
Currencies
Latest
Daily % change
Brazil real BRL=
5.1909
0.6
Mexico peso MXN=
17.0266
-0.06
Chile peso CLP=
914.13
0.03
Colombia peso COP=
3131.64
0.31
Peru sol PEN=
3.3613
0.24
Argentina peso (interbank) ARS=RASL
1,487.5
0.30
Argentina peso (parallel) ARSB=
1,525.0
0.97
Brazil in focus as polling and growth data draw attention
Investor attention in the region centered on Brazil, where a BTG Pactual/Nexus poll released on the day showed President Luiz Inácio Lula da Silva holding a narrow lead over Senator Flávio Bolsonaro, his main right-wing rival, in a potential runoff ahead of October's election.
The Bovespa .BVSP was down 0.2% after posting its steepest weekly decline since May, while the real BRL= rebounded 0.6% following a slide to a four-month low in the previous session.
Brazilian markets were rattled last week by minutes from the central bank's policy meeting, which revealed officials leaning toward a hawkish stance heading into election season.
On Monday, a central bank indicator showed Brazil's economy grew just 0.2% in the second quarter from the previous three months, pointing to a loss of momentum after a strong start to the year, particularly within the crucial services sector.
ILF•
