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Brazil economic activity jumps in November

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MSCI Latam FX index, stocks to snap three-day win streak

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MSCI Latam FX off 0.7%, stocks down 1.69%

(Updates to mid-session trading)

By Purvi Agarwal and Pranav Kashyap

Jan 16 (Reuters) - An index tracking Latin American

emerging market currencies dipped on Thursday, with the Mexican

peso spearheading declines due to investors' anticipation and

caution as they prepare for the potential implications of Donald

Trump's second term as U.S. president.

MSCI's index tracking Latin American currencies

was 0.7% lower, while a measure of stocks

was down 1.69%. Both indexes were on track to

snap a three-session winning streak.

Colombian President Gustavo Petro, late on Wednesday named

two new members to the central bank's seven-member board -

economists Laura Moisa and Cesar Giraldo.

Goldman Sachs analysts said, "according to local news, they

will replace Roberto Steiner and Jaime Jaramillo-Vallejo" who

were perceived as "the most hawkish members."

The central bank meets at the end January to take a call on

interest rates.

The Colombian peso fell 1%, poised for its worst day

since November.

The Mexican peso weakened 1.87% against the dollar,

set for its worst day in over two months.

The dollar index reclaimed lost ground and once again

exerting pressure on emerging market currencies.

This shift came after a softer U.S. core inflation report on

Wednesday sparked speculation about the possibility of more than

one rate cut by the Federal Reserve in 2025.

As the world's largest economy grapples with this

uncertainty over potential rate cuts, emerging markets are also

preparing for the impact of Donald Trump's anticipated tariff

policies.

With Trump's inauguration set for Jan. 20, the EM landscape

is on high alert, anticipating the signing of key formal

documents and bills that could shape future economic dynamics

for the region.

Analysts expect Mexico to be among the worst hit economies,

despite some saying the country could avoid Trump's day one

tariffs owing to Mexican President Claudia Sheinbaum's

intensified immigration and tariff policies.

"Latin America is going to be under some pressure,

particularly if we go into a much more heightened period of

trade tensions... in Mexico's case, it's how it responds to what

will be an aggressive set of tariffs from Trump," said Marc

Ostwald, chief economist and global strategist at ADM Investor

Services.

Brazil's real slid 0.8%, while its Bovespa stock

index was down 1.46%.

Data showed Brazil's economic activity exceeded expectations

in November, despite the central bank's ongoing monetary

tightening cycle.

The World Bank warned that U.S. across-the-board tariffs of

10% could reduce already lackluster global economic growth of

2.7% in 2025 by 0.3 percentage point if America's trading

partners retaliate with tariffs of their own.

Argentina's central bank passed regulations to promote

currency competition, including allowing dollar-denominated

commercial payments in the local market.

The Argentine peso lost 0.8% and its Merval index

off 2.64%.

MSCI's COLCAP lost 0.3%, while S&P's IPSA index

gained 0.8%. Mexican stocks slipped 0.48%.

Meanwhile, credit ratings agency Fitch said the ceasefire

deal between Israel and Hamas should be positive for Israel's

rating.

Its five-year credit default swaps - measuring the cost of

insuring exposure to the country's bonds - narrowed slightly to

97 basis points from 98 basis points, according to S&P Global

Market Intelligence data.

Key Latin American stock indexes and currencies:

Equities

Latest Daily % change

MSCI Emerging 1066.04 0.97

Markets

MSCI LatAm 1897.65 -1.69

Brazil Bovespa 120862.72 -1.46

Mexico IPC 50003.4 -0.48

Chile IPSA 6957.67 0.84

Argentina MerVal 2633071.63 -2.64

Colombia COLCAP 1393.03 -0.33

Currencies Latest Daily % change

Brazil real 6.06 -0.84

Mexico peso 20.8333 -1.87

Chile peso 1012 -0.76

Colombia peso 4341.75 -1.05

Peru sol 3.7565 0.07

Argentina peso 1,041.0 0.00

(interbank)

Argentina peso 1,215.0 0.82

(parallel)