EMERGING MARKETS-Higher commodities, weaker dollar lift LatAam assets amid US policy shifts

By Nikhil Sharma

June 2 (Reuters) - Latin American assets firmed on Monday, capitalizing on a weaker dollar and higher commodity prices against the backdrop of another shift in U.S. President Donald Trump's trade policies, particularly his plans to double metal tariffs.

MSCI's index of Latin American equities .MILA00000PUS rose 0.75%, while a parallel index for currencies .MILA00000CUS was up 0.2%.

The dollar index =USD fell 0.7% to hit its April 22 low.

A layer of uncertainty shrouded global investors after Trump on Friday threatened to double duties on imported steel and aluminum to 50% from Wednesday.

That came hours after he accused Beijing of violating an agreement with the U.S. to mutually roll back tariffs and trade restrictions for critical minerals.

On Sunday, U.S. Treasury Secretary Scott Bessent said Trump would soon speak with Chinese President Xi Jinping to settle a dispute over critical minerals.

Trump's on-again-off-again trade war has been detrimental to U.S. assets, which have lately been losing their safe-haven appeal, prompting investors to look for alternatives internationally.

"Overall level of uncertainty and lack of reliability in the U.S. continues to feed one narrative, and that is diversification away from the dollar," said Alejandro Cuadrado, global head of FX and LatAm Strategy at BBVA.

Mexico's peso MXN= was the top-performing currency for the day, up 1.2%, influenced by a monumental jump in oil prices after producer group OPEC+ kept output increases in July unchanged, defying expectations.

Revenues from oil exports constitute a significant chunk of overall income for Latin American economies. Mexico and Brazil are two of the biggest oil producers in South America.

Mexico's equity markets .MXX were steady for the day, with Walmart's Mexico unit WALMEX.MX rising 2%.

The country voted in its first-ever judicial elections on Sunday, as part of its efforts to reform the nation's judiciary that critics warn could jeopardize the rule of law. The election results are expected on June 15.

In Brazil, the local real BRL= gained 0.6% against the greenback. The country's main stock index .BVSP added 0.2%, boosted by energy and mining stocks.

Gains were restricted, however, by a survey revealing a contraction in Brazil's industrial activity in May, the first in 17 months, hit by lackluster demand.

Economists polled by Brazil's central bank expect the inflation rate to hit 5.46% by the end of this year, according to a fresh survey, down from the 5.50% forecast a week earlier.

The week is packed with key data for Latin America's biggest economy, including industrial output for April, alongside trade balance and PMI numbers for May.

Meanwhile, the Chilean peso CLP= strengthened 0.8%, powered by higher copper prices. The country is the world's largest copper producer.

Elsewhere, Ukrainian bonds slipped as the second round of peace talks between Russia and Ukraine ended in barely an hour.

International bonds, with 2041 maturity, fell about 2 cents to the dollar.

Key Latin American stock indexes and currencies: