LatAm currencies approach record high as dollar dips amid US-China trade talks

Bengaluru — An index tracking Latin American currencies inched closer to a record high on Monday, as investors anticipated a potential breakthrough in US-China trade negotiations.

MSCI’s index for Latin American currencies leapt 0.5% to trade near a record high hit in July 2011.

The move was helped by a softer US dollar, which eased as top officials from Washington and Beijing met in London to try to defuse tensions between the two economic powerhouses.

The talks aim to revive a preliminary agreement struck last month, which had briefly relieved investors after weeks of uncertainty unleashed by US President Donald Trump’s tariff policies since his inauguration in January 2025.

The instability has bludgeoned confidence in US assets, especially the dollar, pushing investors to seek better returns in emerging markets.

“The USD weakness is clearly helpful for all who manage their currencies vs the USD. The tighter that management, the more the benefit,” said Rob Brewis, portfolio manager at Aubrey Capital Management.

High-yielding currencies such as the Brazilian real have drawn heavy inflows from the US this year. The real has soared about 10% so far in 2025. On Monday, the real was down 0.4%, influenced by lower iron ore prices, with Brazil being a major exporter of the commodity.

Sao Paulo’s main stock index dropped more than 1%, heading for its eighth decline in the last nine trading sessions. Dragging down the index was heavyweight oil firm Petrobras, which fell 2.3% to a more than one-month low, while a similar drop for lender Bradesco also weighed.

Additionally, a gauge of the region’s equities fell 0.4%. In Mexico, the peso edged up 0.2% in cautious trading after the country’s annual inflation rate accelerated in May to breach the central bank’s target range, adding a stumbling block to its policy easing cycle.

The local equity index was down 0.3%. Colombia’s peso fell 0.7%, while the main stock index COLCAP dipped 0.1% ahead of the nation’s May inflation numbers, which are likely to show a moderation in price pressures.

Colombia was thrown into political turmoil after Senator Miguel Uribe, a potential presidential contender, survived an assassination attempt after getting shot in the head during a campaign event on Saturday.

Fiscal woes were also clouding the economy, with finance minister German Avila’s statement on Friday hinting at a possible deviation from compliance with fiscal rules.

Chile’s peso was steady after data revealed that copper exports from the world’s biggest producer of the red metal rose 4.4% year-on-year in May.

The Santiago stock index added 0.1%. Elsewhere, Peru’s sol was largely unchanged against the dollar as investors awaited an interest rate verdict due later this week.

Reuters