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Mexican peso rises after worst year since 2008

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Chile's economic activity increases in November

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Brazilian airline Gol jumps after tax deal

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MSCI Latin American stock index up 0.5%, FX index up 0.3%

(Updates to mid-session trading)

By Lisa Pauline Mattackal and Pranav Kashyap

Jan 2 (Reuters) - Most Latin American currencies

reversed course and moved higher on Thursday, starting the year

on a modest note, against a resurgent U.S. dollar as investors

braced for the impact of Donald Trump's presidency and likely

higher-for-longer U.S. interest rates on the region's markets.

Mexico's peso jumped 1.1%, recovering some ground

after weakening nearly 1% on Dec. 31. It had slumped nearly 23%

in 2024, its biggest annual loss since the 2008 financial

crisis.

MSCI's index of regional currencies was up

0.3 0.2%. The dollar jumped 0.7%.

Brazil's real, reversed course, and traded 0.28%

higher while stocks were flat. The country's S&P

Global's December manufacturing Purchasing Manager's Index (PMI)

came in at 50.4, from 52.3 the previous month.

Other regional equities fared better, with bourses in Mexico

, Colombia and Argentina higher on the

day. MSCI's index of regional stocks rose 0.5%.

Investors were broadly cautious as they returned from the

New Year's Day holiday, eyeing an uncertain emerging market

outlook for 2025 with the Federal Reserve expected to take a

more hawkish stance on policy easing.

Additionally, incoming U.S. president Donald Trump's

threatened global tariffs, if enacted, are expected to hit

global trade and increase inflation, particularly weighing on

countries such as Mexico.

"The USD is starting 2025 off as it appears likely to

continue, at least for the next few months," said Shaun Osborne,

chief FX strategist at Scotiabank.

"Investors continue to focus on the outlook for slower and

limited rate cuts from the Fed versus other major central banks

in the coming year, as well as the anticipation that the second

Trump presidency will deliver USD-supportive policies."

In December, the rising U.S. dollar and increasing Treasury

yields, driven largely by shifts in U.S. interest rate

expectations, dealt a heavy blow to emerging markets. This

pressure prompted several central banks in emerging economies,

including Brazil, to step in to curb steep currency

depreciations.

Throughout 2024, Latin American markets notably lagged

behind their emerging market counterparts. MSCI's regional stock

index plummeted over 30%, marking its most dismal performance

since 2015, while the currency index recorded its steepest

annual decline since 2020.

On the day, Chile's peso dropped past the 1,000 mark,

and hit its lowest since July 2022. Copper prices hovered around

a five-month low on concerns about slowing global demand. Chile

is the world's largest copper producer.

The currency was trading 1.1% lower.

Data showed Chile's economic activity rose 2.1% on an annual

basis in November, the fifth consecutive month of expansion.

Shares of Brazilian airline Gol jumped nearly 7%

after the company announced it had reached a deal with the tax

revenue service to settle some fiscal obligations.

Key Latin American stock indexes and currencies:

Equities

Latest Daily % change

MSCI Emerging Markets 1070.11 -0.6

MSCI LatAm 1861.53 0.48

Brazil Bovespa 120202.06 -0.07

Mexico IPC 49663.77 0.3

Chile IPSA 6682.36 -0.42

Argentina MerVal 2692799.25 6.28

Colombia COLCAP 1394.39 1.07

Currencies Latest Daily % change

Brazil real 6.1669 0.28

Mexico peso 20.6061 1.1

Chile peso 1003.92 -1.14

Colombia peso 4373.5 0.65

Peru sol 3.753 0.02

Argentina peso 1,031.5 0.05

(interbank)

Argentina peso 1,195.0 2.85

(parallel)