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Brazil's central bank flags caution over US tariffs

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Colombian inflation reading expected

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Trump threatens higher tariffs on India

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MSCI Latam FX flat, stocks up 0.2%

By Purvi Agarwal and Sukriti Gupta

Aug 5 (Reuters) - Most Latin American currencies were

flat to slightly higher against the dollar on Tuesday, while

regional stocks advanced on rising hopes that the U.S. Federal

Reserve will ease monetary policy soon.

Heavyweight Brazilian equities gained 0.5%. Mexican

stocks rose 0.7%, while shares in Argentina were

up 1.6%.

MSCI's index tracking Latam stocks was up

0.2%, on course for a second session of gains.

Expectations that the Federal Reserve could cut rates in the

near term were bolstered following a bleak jobs report and the

resignation of Fed Governor Adriana Kugler over the weekend.

This leaves room for President Donald Trump to appoint a

replacement who is expected to advocate lower rates, amid the

president's strained relations with the central bank.

"The tariff impact on the U.S. economy in the coming months

is probably going to be inflationary... the expectation that the

Fed are almost certainly going to cut in September is probably

not going to be such an easy decision," said Jon Harrison,

managing director of EM Macro Strategy at TS Lombard.

Investors are pricing in a more than 88% chance of a rate

cut in September, up from about 63% last week, as per CME's

FedWatch tool.

The dollar index fell more than 1% on Friday and was

flat on Monday but was up 0.3% on Tuesday.

Chile's peso was flat, while Mexico's gained

0.2%, with MSCI's Latam currencies' gauge flat.

Brazil's real weakened 0.2%. Former president Jair

Bolsonaro was placed under house arrest on Monday, in the latest

legal pressure that Trump tried to reduce by threatening Brazil

with 50% tariffs.

The Brazilian central bank flagged caution over the impact

of the duties and reaffirmed a policy stance aimed at lowering

inflation expectations.

However, Harrison at TS Lombard said: "Brazil has the

highest interest rates in EMs, and we've seen a large number of

exemptions (to U.S. tariffs) and the possibility of further

negotiations... the impact on the Brazilian economy is probably

not going to be as great as people had feared."

Latam's largest economy faces one of the highest tariff

rates in the U.S., alongside other BRICS group members such as

South Africa and India. Trump said he would raise tariffs on

Indian imports over the next 24 hours, given the country's

continued purchases of Russian oil.

India's rupee was down 0.2% on the day, while

stocks slipped 0.3%, as markets closed before the latest

announcement.

The rupee is among the few currencies that have depreciated

against the dollar so far this year, compared to other EM

currencies that capitalized on the dollar's weakness in 2025.

Colombia's peso slipped 0.1%. The Colombian central

bank revised its inflation projections higher for 2025 and 2026

on Monday, ahead of a consumer price index reading.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

Equities Latest Daily %

change

MSCI Emerging Markets 1245.93 0.72

MSCI LatAm 2247.67 0.19

Brazil Bovespa 133590.65 0.47

Mexico IPC 57048.54 0.7

Chile IPSA 8208.12 -0.02

Argentina Merval 2324750.1 1.64

Colombia COLCAP 1751 -0.03

Currencies Latest Daily %

change

Brazil real 5.5068 -0.16

Mexico peso 18.8571 0.2

Chile peso 964.82 0.03

Colombia peso 4102.46 -0.11

Peru sol 3.566 -0.04

Argentina peso (interbank) 1354.5 -5.87

Argentina peso (parallel) 1300 -0.38