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US, China extend tariff truce by 90 days

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Colombia bought back $2.96 billion in bonds

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Brazil July CPI rose 0.26%, below forecast

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MSCI Latam stocks at five-week peak

(Updates with afternoon levels)

By Pranav Kashyap, Sukriti Gupta and Purvi Agarwal

Aug 12 (Reuters) - A gauge of Latin American currencies

reached a record high, while stocks hit a five-week high on

Tuesday after an inflation reading in the United States

reinforced expectations for the Federal Reserve to cut interest

rates.

The dollar index fell 0.4% after U.S. consumer prices

increased moderately in July, supporting the case for a Federal

Reserve interest-rate cut next month.

An index tracking Latin American currencies

rose 0.9%, while a similar gauge for stocks

jumped 2.1%, on track for its biggest one-day jump in nearly

three months.

Rising expectations of a U.S. rate cut, following a weak

jobs report and speculation over potential changes to the Fed's

board, triggered a swift repricing last week that has bolstered

emerging markets.

"We're seeing U.S. indices move higher as markets sort of

shrug off some of the costs and distortions of tariffs and Latam

is part of the story here," said Rachel Ziemba, founder of

Ziemba Insights.

Chile's peso rose 1.5% on Tuesday, outperforming

peers and reaching its highest level in over two weeks,

supported by rising copper prices.

The currency was poised for its strongest session since late

April.

Chilean stocks were flat after hitting a record

high in last session.

Brazil's real jumped 1% to its highest level in

nearly a year, while local equities surged 1.7% to their

highest since July 9.

Brazil's July inflation came in below forecasts, as cheaper

food provided monthly relief, though the annual inflation rate

remained well above the central bank's target.

The country's central bank paused its rate-hike cycle in

late July, keeping interest rates near a two-decade high of

about 15% to combat inflation, while complications arose from

U.S. President Donald Trump's 50% tariffs.

"We've been seeing Brazilian markets shrug off the tariff

threat ... the central bank is likely to stay cautious in the

near term, just given some of the macro uncertainties," said

Ziemba.

However, a BofA Global Research survey revealed a drop in

confidence among participants, with the proportion expecting

Brazil's main index to surpass the 140,000 mark by year-end

halving in August compared to July, as tariffs weighed on

sentiment toward Brazilian assets.

On a broader front, investors cheered another 90-day

extension of the tariff truce between the U.S. and China, which

postponed triple-digit duties on Chinese exports to the United

States.

Colombia executed a $2.96 billion bond buyback, cutting

interest outlays by about $28 million this year and $135 million

in 2026. Stocks in Bogota rose 0.6%, while the peso

gained 0.5%, marking its ninth consecutive session of

gains.

Mexico's peso advanced 0.4%, while stocks

ticked up 0.6%. Grupo Mexico, heavyweight copper

miner, rose 4.3%, boosting equities.

Stocks in Buenos Aires rose 0.3%, while the

Argentine peso gained 0.3%.

Elsewhere, international bonds in Ukraine reversed earlier

gains, with those maturing in 2036 falling 1.5

cents on the dollar.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1258.95 0.26

MSCI LatAm 2357.65 2.03

Brazil Bovespa 137868.19 1.66

Mexico IPC 58661.65 0.55

Chile IPSA 8586.06 -0.06

Argentina Merval 2310693.46 0.32

Colombia COLCAP 1824.32 0.63

Brazil real 5.3875 1

Mexico peso 18.584 0.34

Chile peso 953.98 1.58

Colombia peso 4014.5 0.45

Peru sol 3.528 0.13

Argentina peso (interbank) 1316 -3.12

Argentina peso (parallel) 1310 -1.15