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Latam FX down 0.3%, stocks down 0.9%

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Chile's interest rate decision later in the day

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Hungary approves Orban's 2026 budget with tax cuts

(Updates with mid-session prices)

By Nikhil Sharma and Pranav Kashyap

June 17 (Reuters) - Latin American assets traded lower

on Tuesday, as caution prevailed with the Israel-Iran conflict

entering its fifth day, while the focus was also on a handful of

interest rate decisions in the region.

The MSCI's index for Latin American currencies

was down 0.3%, just off its fresh record high

reached earlier in the session.

A parallel index for the latam equities

was trading 0.9% lower, taking cues from caution in global

equities.

Tensions in the Middle East took a dramatic turn when U.S.

President Donald Trump said that American patience with Iran was

wearing thin, though he also noted that there was no immediate

intention to "take out" its leader. He further suggested the

possibility of diplomatic outreach amid the ongoing conflict.

Israel's shekel reversed course, falling 0.5%

against the dollar after an eye-watering 3.5% surge the previous

day, its sharpest single-day gain in nearly 50 years.

Meanwhile, investors chasing yield continued to pour into

developing markets. EPFR data showed local-currency EM bond

funds bagged a record eighth straight week of inflows - a clear

vote of confidence in the hunt for returns beyond Wall Street.

"People in foreign countries that had been investing in the

U.S. assets are now bringing those assets home. So that also

tends to be negative for the dollar," said Jon Harrison,

managing director of EM Macro Strategy at TS Lombard.

Brazil's real was flat amid choppy trading, but it's

still up more than 11% year-to-date, turbocharged by sky-high

local interest rates-currently parked at 14.75%, a level not

seen in nearly two decades.

All eyes are on Brazil's central bank ahead of its

policy meeting on Wednesday, with forecasts pointing to rates

remaining unchanged.

The local equity index slipped 0.5%.

Mexico's peso fell 0.4% - on course to log its

biggest single-day drop in three weeks, while its local

benchmark index lost 0.9%.

Chilean investors closely monitored the central bank's

upcoming rate decision. The consensus was another hold at 5% for

the fourth consecutive meeting, as policymakers tread carefully

in the face of persistent inflation. Recent data showed the

world's largest copper producer outperforming economic

forecasts.

The Chilean peso drifted 1% lower - setting it on

course for its worst single-day drop in over one month, while

Santiago's stock market dropped 0.8%.

Elsewhere, Colombia's peso firmed by 0.2%, and the

main stock index was flat.

However, the country remains plagued with political

uncertainty after Senator Miguel Uribe, a potential presidential

candidate, was shot in the head earlier this month during a

campaign event.

Uribe is in "extremely critical" condition after undergoing

emergency surgery on Monday.

Argentina's stocks resumed trading after a holiday,

falling 2.4% on the day, while Hungary's forint rose

0.4% and Budapest stocks rose 1.3%, approaching record

highs. The catalyst was the parliament's passage of Prime

Minister Viktor Orban's 2026 election-year budget, featuring

hefty tax breaks for families.

Key Latin American stock indexes and currencies:

MSCI Emerging Markets 1193.57 -0.38

MSCI LatAm 2281.86 -0.91

Brazil Bovespa 138608.22 -0.47

Mexico IPC 56548.74 -0.87

Argentina Merval 2076351.0 -2.388

3

Chile IPSA 8082.58 -1.01

Colombia COLCAP 1632.92 -0.02

Brazil real 5.4992 -0.15

Mexico peso 18.9994 -0.44

Chile peso 945.01 -1.07

Colombia peso 4096.5 0.1

Peru sol 3.61 -0.34

Argentina peso (interbank) 1160 1.94

Argentina peso (parallel) 1180 0.85