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Economists revise Brazil's rate projections upwards for

2025

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Argentina logs largest energy trade surplus in 18 years in

2024

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MSCI FX, stocks indexes at over one-month highs

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MSCI FX up 1.25%, stocks add 1.98%

(Updates to mid-session trading)

By Purvi Agarwal, Marc Jones and Pranav Kashyap

Jan 22 (Reuters) -

An index tracking Latin American currencies soared to its

highest level in over a month on Wednesday, as a wave of

cautious optimism came after

U.S. President Donald Trump

refrained from immediately imposing the

steep tariffs

he had previously threatened.

The Mexican peso rose 0.7% against the U.S. dollar.

This uptick followed a dip on Tuesday when Trump

hinted

at potentially imposing substantial tariffs on Mexico and

Canada starting Feb. 1, causing jitters.

Last year, the peso suffered a dramatic decline, losing over

20% of its value against the dollar - its worst annual

performance in 16 years. The currency was battered by a

combination of tariff threats, domestic political uncertainty,

and persistently high U.S. interest rates.

As the Bank of Mexico prepares to make its decision on

interest rates on Feb. 5, Olga Yangol, head of EM research &

strategy at Credit Agricole CIB said that the central bank might

consider holding rates steady if the peso faces further pressure

from potential tariffs.

However, providing some respite in the session was the

U.S. dollar, which slipped to a two-week low.

Several analysts caution that volatility in emerging

market assets is likely to remain elevated in the coming weeks.

Investors are expected to closely monitor whether President

Trump will adhere to his aggressive trade rhetoric or if a more

tempered approach will prevail.

"This rally is likely to be short-lived. Just because we

didn't see certain orders on day one, doesn't mean that they are

not forthcoming," Yangol added. "It's premature for markets to

price out the threat of tariffs."

Among other hard-hit currencies, the Brazilian real

rose 1.39% against the dollar, set for its third straight

session of gains after its 27% plunge last year.

Brazilian government officials reaffirmed their commitment

to balancing public accounts, as markets continue to question

the administration's ability to meet its fiscal targets, which

sent the real to record lows last month.

Economists have ramped up bets on Brazil's interest-rate

projections this year, citing rising inflation expectations and

concerns over the state of the government's finances.

Currencies in the export-heavy Chilean and Colombian

economies jumped 1.22% and 1.17% respectively in light

trading, with the Chilean peso hitting a near three-week high.

Argentina's peso was little changed. The country

logged its largest energy trade surplus in 18 years last year,

in another set of data that marked a win for President Javier

Milei's efforts to turn the economy around.

Major investment banks such as JPMorgan ( JPM ) have argued

that the government could lift long-imposed capital controls and

even return to international bond markets this year, especially

if it can seal a new IMF deal.

MSCI's index tracking Latin American currencies

was up 1.25%, while the stocks gauge

rose 1.98%. Both indexes were set for their

fourth consecutive session of gains.

Chinese assets remained under pressure after fresh talks of

tariffs by Trump. He said his administration was considering 10%

tariffs on Chinese imports, compared with a 60% tariff he

pledged during his election campaign.

"This morning we have seen 10% China tariffs are on the

cards and that is throwing a bit of doubt on our more moderate

tariff process (view)," said Amundi's head of emerging markets

Yerlan Syzdykov.

"It is hard to have a base case scenario," he added, given

the differing reports on how quickly tariffs could be

introduced. "We shouldn't be complacent ... gradual does not

mean more moderate."

Futures tracking China's Hang Seng Index rose 0.4%.

Key Latin American stock indexes and currencies:

Equities

Latest Daily % change

MSCI Emerging 1083.21 0.19

Markets

MSCI LatAm 1975.22 1.98

Brazil Bovespa 123413.16 0.06

Mexico IPC 51212.67 1.51

Chile IPSA 7026.88 -0.16

Argentina MerVal 2659762.6 1.53

Colombia COLCAP 1383.78 -0.6

Currencies Latest Daily % change

Brazil real 5.9384 1.39

Mexico peso 20.4672 0.7

Chile peso 989.9 1.22

Colombia peso 4264 1.17

Peru sol 3.719 0.23

Argentina peso 1,047.0 -0.05

(interbank)

Argentina peso 1,220.0 1.21

(parallel)