*

U.S. and Colombia reach agreement, tariffs, sanctions on

hold

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Moody's raises Argentina's rating for first time in five

years

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MSCI Latam stocks index set to snap six session win streak

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MSCI Latam FX down 0.9%, stocks off 0.2%

(Updates to mid-session trading)

By Purvi Agarwal, Lisa Pauline Mattackal and Johann M

Cherian

Jan 27 (Reuters) - The currencies of Colombia and Mexico

depreciated on Monday, leading declines among Latin American

peers after a trade spat between the U.S. and Colombia

re-ignited fears about the impacts of U.S. President Donald

Trump's proposed tariffs on the region.

The U.S. and Colombia pulled back from the brink of a trade

war on Sunday after the White House said Colombia had agreed to

accept military aircraft carrying deported migrants.

That led to the U.S. holding off on a Trump directive to

impose tariffs and sanctions, which included a 25% tariff on

imports that could go up to 50% in a week, among others, on the

third-largest U.S. trading partner in Latin America.

Colombia's peso trimmed early declines and was last

down 0.7%, on track for its biggest daily drop in over a week.

The currency had declined nearly 2% earlier in the session.

The Mexican peso weakened 2.3% after logging its

biggest weekly rise in 2025 on Friday. The currency is among the

most sensitive to tariff headlines as 80% of the country's

exports go to its northern neighbor.

Investors also sold Colombian and Mexican

10-year bonds.

The spat highlights how uncertainty over tariffs has clouded

the outlook for EMs, compounding pressures from economic

uncertainty and the prospect of higher-for-longer U.S. interest

rates.

"The episode highlights how the Trump administration will

intertwine trade policy with national security policy and so

markets will face greater volatility and surprises... the

biggest test of this strategy will be with China," said Win

Thin, Brown Brothers Harriman's global head of market strategy.

Economies, including China and Mexico's, are on edge after

Trump last week earmarked Feb. 1 for additional tariffs on the

country's top trading partners.

BofA Global Research analysts said U.S. tariffs could force

Mexico's central bank to keep rates on hold, "as the peso is

likely to weaken significantly in that scenario."

MSCI's index tracking regional currencies

was down 0.9%, while the stocks' measure

was off 0.2%, set to snap a six-session winning

streak.

This week, investors will also closely watch a rate decision

from the Fed, which is expected to keep rates on hold.

Rate decisions are also due from Brazil, Colombia and Chile

through the week.

Inflation expectations in Brazil for this year rose for the

15th straight week, a survey of private economists showed, a

trend closely watched by the central bank ahead of an expected

rate hike.

The Argentine peso dipped 0.3% and the Merval stock

index lost 5%.

Ratings agency Moody's on Friday raised Argentina's

long-term foreign currency sovereign credit rating, citing

policy changes that have helped address economic and fiscal

challenges.

Colombia's main index gained 1.27% and U.S.-listed

Colombia ETF gave up early declines and was last up

0.8%.

Mexican stocks added 0.9%, while Brazil's Bovespa

gained 1.6%.

Key Latin American stock

indexes and currencies

Stock indexes

Latest Daily % change

MSCI Emerging Markets 1085.94 -0.37

MSCI LatAm 1984.31 -0.23

Brazil Bovespa 124410.53 1.6

Mexico IPC 51824.98 0.91

Chile IPSA 7028.57 -0.56

Argentina MerVal 2435431.66 -5.09

Colombia COLCAP 1433.49 1.27

Currencies Latest Daily % change

Brazil real 5.9093 0.03

Mexico peso 20.7375 -2.35

Chile peso 986.1 -0.59

Colombia peso 4199.5 -0.68

Peru sol 3.743 -0.67

Argentina peso (interbank) 1,049.0 -0.24

Argentina peso (parallel) 1,210.0 1.22