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Mexico FX, stocks, set for best day since November

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Argentina country risk index falls

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Colombian markets closed

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MSCI Latam stocks index up 2%, FX index up 1%

(Updates to mid-session trading)

By Lisa Pauline Mattackal and Pranav Kashyap

Jan 6 (Reuters) - Latin American markets jumped on

Monday, with the Mexican peso at the forefront of a regional

rally following a report that the U.S. tariffs under

President-elect Donald Trump could be lower than feared.

According to the Washington Post, Trump's team is

considering targeted tariffs that would focus only on critical

imports from all countries. Although Trump disputed these

claims on Truth Social, the suggestion his moves might be less

severe than threatened was enough to invigorate the markets.

This news propelled the Mexican peso up 1.39% against

the dollar, while the country's main stock index also leaped as

much as 1.7%, buoyed by optimistic sentiment. Both were on track

for their best day since November.

Other Latin American markets jumped as the U.S. dollar

slid after the report, with MSCI's gauge of regional

currencies up 1% at the highest in more than two

weeks.

An index of Latin American stocks rose

nearly 2%, on pace for its best day since August.

"If we've learned anything over the years, it's that Trump

is unpredictable. He loves shaking up markets, but the final

outcomes are often less dramatic than his initial

announcements," said ING analysts in a note.

The specter of Trump's proposed 25% tariffs on Mexican and

Canadian imports, along with a steep 60% tax on Chinese goods,

had previously cast a shadow over emerging market currencies.

The Mexican peso suffered its largest annual decline since 2008.

However, the potential for lower tariffs now offers a glimmer of

hope.

The dollar's run to two-year peaks over the past month, due

to concerns about the potential inflationary impact of Trump's

policies and expectations for fewer U.S. interest rate cuts, has

also weighed heavily.

Scotiabank's chief FX strategist, Shaun Osborne, said news

of more moderate tariffs could "take some of the steam out of

the dollar's appreciation trend."

Other EM currencies rose, with the South African rand

jumping nearly 1%

Brazil's government said in a statement that Indonesia is

formally joining BRICS as a full member.

Elsewhere, traders said Argentina's country risk index,

which measures the yield spread on its bonds versus U.S. debt,

fell under the 600-basis-point barrier for first time since

2018.

Argentina's stock index jumped 2.36% to a record

high. Stock indexes in Brazil and Peru rose

1.1% and 1.2%, respectively.

Brazil's real rose 1.1% and the Chilean peso

was up 0.5%.

Venezuela's government said it will break diplomatic

relations with Paraguay and remove its diplomats from the South

American country.

HIGHLIGHTS

** Chile central bank mulled keeping rates unchanged in

December, minutes show

** Mexico s/a consumer confidence at 47.1 in December

Key Latin American stock indexes and currencies:

Equities

Latest Daily % change

MSCI Emerging Markets 1080.47 0.68

MSCI LatAm 1879.45 2

Brazil Bovespa 119886.07 1.14

Mexico IPC 49409.07 0.92

Chile IPSA 6780.66 1.19

Argentina MerVal 2793412.92 2.36

Colombia COLCAP 1396.23 -0.24

Currencies Latest Daily % change

Brazil real 6.1088 1.14

Mexico peso 20.3314 1.39

Chile peso 1010.94 0.51

Colombia peso 4339 0.28

Peru sol 3.76 0.19

Argentina peso 1,034.5 -0.15

(interbank)

Argentina peso 1,185.0 1.66

(parallel)