Emerging Markets: Latam FX hits two-week high as markets cheer trade deals
23/07/2025 22:16
US, EU trade talks bolstered by Trump's agreement with Japan Brazil to ease total spending curbs America Movil swings to profit in second quarter MSCI Latam stocks advance 1.8% Updates with afternoon levels By Purvi Agarwal and Ragini Mathur July 23 (Reuters) - An index tracking major Latin American currencies advanced to a two-week high on Wednesday, as risk sentiment improved after the U.S. struck a trade deal with Japan and drew closer towards a similar agreement with the European Union. MSCI's index tracking Latam currencies .MILA00000CUS jumped 0.6%, hit a two-week peak and was rising for the fifth consecutive day against a softer dollar. On Tuesday, the U.S. signed a deal with Japan to lower hefty duties on Japanese imports and secured a $550 billion package of U.S.-bound investment and loans from Tokyo. Additionally, on Wednesday, two European Union diplomats said that the bloc is heading towards a trade deal with Washington that would result in a broad 15% tariff on EU's exports to the United States. The deals raised investor expectations that other top trade partners could also secure agreements with the U.S. ahead of the August 1 deadline when the U.S. tariffs are expected to kick in. The Philippines and Indonesia were among the latest emerging market countries to strike deals with the U.S. and investors are also keen on a potential deal with India. "The deal (between the U.S. and Japan) is probably the reason why you're seeing not only the global equity markets rising, but also why some of the more risk-sensitive currencies in Latin America are also performing very well. It's just a broad boost to investor sentiment," said Brendan McKenna, an international economist at Wells Fargo. The trade progress sent ripples of optimism across global markets, with MSCI's global EM stocks gauge .MSCIEF trading near levels last seen in January 2022. Mexican peso MXN= firmed 0.6% against the dollar, while the Colombian peso COP= also gained 0.5%. The Brazilian real BRL= strengthened 0.8% after the government eased the total spending curbs previously deemed necessary to comply with fiscal rules as it raised its net revenue forecast by 27.1 billion reais ($4.87 billion) this year. President Luiz Inacio Lula da Silva's administration has been trying to incorporate fiscal discipline ever since investors sold off Brazilian assets last year, making the real one of the worst performers in 2024. Adding to pressures on the country, Trump earlier this month threatened a 50% duty on Brazilian exports to the United States. Mexico also came under fire after Trump announced a 30% levy on its imports. These moves put resource-rich Latin American countries, previously regarded as comparative safe havens, in the crosshairs of Trump's tariff salvo. "The amount of trade deals that the U.S. has secured over the last couple of weeks at least make a U.S.-Mexico trade deal or some type of broader deal, a little bit more possible," McKenna added. On the equities front, the index tracking Latin American stocks .MILA00000PUS advanced 1.8% and was set for its biggest one-day gain since May 13. Heavyweight Brazil's Bovespa .BVSP gained 1.11% boosted by a jump in financials stocks. Mexico's America Movil AMXB.MX and Banorte GFNORTEO.MX added 4.3% and 3.4%, respectively, after their upbeat quarterly results. The telecoms giant and the lender boosted the main stock index .MXX, which gained 1.6% Key Latin American stock indexes and currencies:
| Latin American market prices from Reuters | ||
| Equities | Latest | Daily % change |
| MSCI Emerging Markets .MSCIEF | 1267.25 | 1.54 |
| MSCI LatAm .MILA00000PUS | 2282.94 | 1.77 |
| Brazil Bovespa .BVSP | 135529.41 | 1.11 |
| Mexico IPC .MXX | 56410.08 | 1.61 |
| Chile IPSA .SPIPSA | 8107.78 | -0.14 |
| Argentina Merval .MERV | 2077690.49 | 3.343 |
| Colombia COLCAP .COLCAP | 1720.55 | -0.41 |
| Currencies | Latest | Daily % change |
| Brazil real BRL= | 5.5204 | 0.8 |
| Mexico peso MXN= | 18.5306 | 0.61 |
| Chile peso CLP= | 948.71 | 0.02 |
| Colombia peso COP= | 4039.5 | 0.47 |
| Peru sol PEN= | 3.5538 | 0.02 |
| Argentina peso (interbank) ARS=RASL | 1258 | -0.16 |
| Argentina peso (parallel) ARSB= | 1290 | 1.53 |
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