EMERGING MARKETS-Latam currencies, stocks recover ground as "Liberation Day" looms

By Johann M Cherian and Lisa Pauline Mattackal

April 1 (Reuters) - Currencies and stock indexes in Latin America staged a cautious rebound on Tuesday, even as investors braced for announcements on U.S. reciprocal trade barriers.

An index tracking Latam currencies against the dollar .MILA00000CUS turned higher in afternoon trade and rose 0.7%, while an index of regional stocks .MILA00000PUS jumped 1.5%, eyeing its best session in over two weeks after losses in the prior session.

However, uncertainty remained as markets waited for details on new U.S. tariffs on Wednesday , which U.S. President Donald Trump has dubbed "Liberation Day." The White House confirmed new tariffs will be imposed, though it provided no details on the size or scope.

The second one-month pause to U.S. tariffs on Mexican and Canadian imports in compliance with existing free trade rules is also likely to expire later this week.

Tariff uncertainty has increased the risk of a "shock scenario" for emerging market currencies, said Wells Fargo international economist Brendan McKenna.

"Our assessments leave the Chilean peso and Mexican peso most vulnerable. The Chinese renminbi, Indian rupee and Peruvian sol may be more insulated."

Emerging market assets broadly held firm in the first quarter despite the back-and-forth on U.S. tariff policy, lifted by hopes for trade negotiations and a broader move away from U.S. markets.

The Latin American stocks index notched its best quarterly performance in over one year while the currency index rose nearly 9% in its best quarter since 2022.

On the day Mexico's peso MXN= jumped 0.6% against the dollar, while the local stock index .MXX rose 1.6%, on pace for its best day in nearly two months.

A Reuters poll showed analysts expect the peso to trade relatively stable in coming months on expectations that any new U.S. tariffs on Mexican products would be limited in scope and short-lived.

Countries prepared to respond to U.S. tariffs. Argentina's foreign minister is expected to meet with U.S. Secretary of State Marco Rubio, while Brazil's Fernando Haddad said the country was still open to negotiations.

Meanwhile, Canadian Prime Minister Mark Carney spoke with Mexican President Claudia Sheinbaum about Canada's plan to fight the U.S.'s "unjustified trade actions," his office said.

"The reciprocal and products tariffs will likely prompt varied responses across different countries, ranging from immediate retaliation to diplomatic negotiations," analysts at UBS said in a note, adding Canada and Mexico could adopt a more "diplomatic approach."

Argentina's Merval index .MERV reversed course to rise 1%.

Brazil's real, the best regional performer this year, BRL= rose 0.4%. Data from JP Morgan also showed that the country's dollar bonds have seen the biggest gains so far in the year, among major emerging markets.

Chile's peso CLP= was flat after data showed economic activity unexpectedly fell in February after a major power outage.

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