EMERGING MARKETS-Latam FX perk up on weaker dollar, trade, Middle East geopolitical tensions mount

By Nikhil Sharma and Pranav Kashyap

June 12 (Reuters) - Latin American currencies inched higher on Thursday, buoyed by a weakening dollar, yet a complex web of global trade uncertainty and geopolitical tensions tempered overall sentiment.

The U.S. dollar =USD languished around a three-year low, still reeling from a softer-than-expected producer price inflation print and Wednesday's underwhelming consumer price rise.

The greenback faced additional pressure after President Donald Trump's announcement that U.S. personnel would be moved out from the Middle East due to escalating tensions.

The sparse details surrounding the U.S.-China preliminary trade truce, agreed upon earlier in the week, did little to bolster the dollar.

"It increasingly looks like higher volatility is returning as we approach the July 9th deadlines and as the real economic impact of the tariffs starts to filter through to the hard data," said Kyle Chapman, FX markets analyst at Ballinger Group.

The Trump's second term has significantly altered the global trade landscape, sparking questions about global growth and challenging the long-held dominance of U.S. assets in investment portfolios.

"The tariff drama is here to stay," Chapman added.

This shift has, in turn, fueled interest in Latin American assets, which boast lower valuations and attractive bond yields.

In Brazil, the real BRL= slipped 0.1% against the dollar.

The government anticipates an annual fiscal boost of about 40 billion reais ($7.22 billion) from a new set of measures formally submitted to Congress.

This comes on the heels of a contentious tax hike rollback on certain credit, foreign exchange, and private pension operations, which had triggered a strong backlash – the real fell 1.2% on the day the plans were announced.

Mexico's local equity index .MXX and the peso MXN= were largely steady. The central bank, in its biannual stability report on Wednesday, acknowledged the country's financial system demonstrated "resilience" despite enduring challenges such as rising inflation and stagnant growth.

In Colombia, which is grappling with fiscal and political turmoil, the peso COP= rose 0.4%, while its main stock index .COLCAP fell 0.7%. The government is considering a multi-billion-dollar debt increase this year to address a widening fiscal deficit.

Chile's peso CLP= rose 0.4% ahead of an interest rate decision next week, with traders anticipating no change. The Santiago stock index .SPIPSA inched up 0.1%.

In Buenos Aires, the main stock index .MERV rose 0.7% ahead of inflation data.

Peru's central bank will announce its rate decision later on Thursday, and is also expected to hold steady, at 4.50%. The Peruvian sol PEN= rose 0.4%.

Meanwhile, Israel's assets came under pressure as the regional geopolitical situation appeared to be deteriorating and as political instability deepened.

The country's five-year credit default swaps rose nine basis points from Wednesday's close, to reach 107 bps, according to S&P Global Market Intelligence.

Israel's blue-chip index .TA35 plummeted 1.6%. Its 100-year bond, which matures in 2120, fell by more than 1 cent on the dollar.

Key Latin American stock indexes and currencies: