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Bank of Mexico lowers key interest rate to 7.75%

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Mexico's inflation slows in July

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India's Modi, Brazil's Lula speak amid Trump tariff blitz

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Russian, Ukrainian assets gain on Trump-Putin meeting news

(Updates with afternoon levels)

By Sukriti Gupta, Purvi Agarwal and Ragini Mathur

Aug 7 (Reuters) -

Latin American currencies and stocks rose on Thursday as

investors brushed aside concerns over U.S. tariffs, while the

Mexican peso slipped after the Bank of Mexico delivered a widely

expected 25-basis-point interest rate cut.

U.S. President Donald Trump's higher tariffs on imports

from dozens of countries took effect on Thursday, following

weeks of uncertainty and intense negotiations.

Brazilian exports to the U.S. face the steepest tariffs,

with some goods now taxed at 50%, while tariffs on goods from

India are expected to rise to the same level.

The BRICS group of countries, comprising Brazil, Russia,

India, China and South Africa, has come under greater scrutiny

from Trump, who accused them of pursuing 'anti-American

policies'.

Indian Prime Minister Narendra Modi and Brazil's

President Luiz Inacio Lula da Silva

spoke by phone

on Thursday, a day after the Brazilian leader told Reuters

he would initiate discussions within the group on addressing

Trump's tariffs.

Brazil's currency hit a near one-month high,

rising 0.7%. Meanwhile, the country's stocks jumped 1.7%

to their highest level in more than two weeks, with analysts

noting that tariff exemptions secured last week could soften the

impact of U.S. duties.

In contrast, Mexico's peso extended its declines,

last down 0.3%, while its stocks climbed 1.8% to their

highest level in a month.

The gains came as the Bank of Mexico lowered its benchmark

interest rate, though at a slower pace, bringing the rate to

7.75%, its lowest level in three years.

Data earlier in the day showed Mexico's headline inflation

slowed in July to its lowest level since late 2020, though the

closely-watched core rate remained above the central bank's

official target.

"Core inflation remains relatively sticky, particularly

services inflation, so that means that the central bank will be

able to cut rates, but only at a gradual pace," said Andrés

Abadía, chief Latam economist at Pantheon Macroeconomics.

"There is uncertainty about what will happen to tariffs

after the 90-day pause and that forces the central bank to be a

little bit more cautious."

More broadly, MSCI's Latam currency gauge

rose 2.2%, with other regional currencies

trading higher against the U.S. dollar.

The dollar index was marginally higher after a

report said U.S. Federal Reserve Governor Christopher Waller

emerged

as a favorite for the next Fed Chair, who analysts say is

respected in financial markets.

Equities in most developing markets, particularly in

Asia rose after Trump exempted chip firms manufacturing in the

United States, or ones that committed to do so, from his

sweeping tariffs.

MSCI's index tracking Latam stocks

advanced 2.1%, hitting its highest in two weeks and on course

for a fourth session of gains.

Shares in Chile were up 1.2%, with miner SQM

gaining 4%, tracking higher copper prices.

Elsewhere, the Kremlin said President Vladimir Putin and

Trump will meet in the coming days, as Trump seeks a

breakthrough to end the Ukraine war.

Russia's rouble strengthened 0.9%, over-the-counter

market data showed, while Moscow stocks jumped. Ukrainian dollar

bonds rallied, broadly up near 3 cents on the dollar each,

following the announcement.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1260.64 1.3

MSCI LatAm 2328.58 2.18

Brazil Bovespa 136776.83 1.66

Mexico IPC 58197.68 1.83

Chile IPSA 8344.93 1.18

Argentina Merval 2358802.4 -2.3

1

Colombia COLCAP 1774.53 0.72

Brazil real 5.4226 0.73

Mexico peso 18.657 -0.27

Chile peso 966.49 0.85

Colombia peso 4046 0.09

Peru sol 3.538 0.45

Argentina peso 1326 0.38

(interbank)

Argentina peso (parallel) 1305 1.1