EMERGING MARKETS-Latam FX, stocks recover as Israel-Iran ceasefire boosts sentiment

By Purvi Agarwal, Ragini Mathur and Pranav Kashyap

June 24 (Reuters) - Latin American currencies and stocks rebounced on Tuesday, buoyed by relief after U.S. President Donald Trump announced a ceasefire between Israel and Iran , easing investor jitters from a turbulent 12-day conflict.

Markets welcomed the pause in regional tensions, as Israeli stocks .TA125 rallied 1.5% and the shekel <ILS=> surged 1.3% to a two-year high against a weakening dollar. Israeli dollar bonds also advanced across the board.

Momentum spread across the Middle East, with Turkey's stocks .XU100 climbing 3.5%, while Saudi Arabia’s benchmark .TASI posted a 2.4% gain and its dollar bonds edged higher.

"The focus will be on whether the ceasefire can hold ... this is still a fluid situation," said Kathleen Brooks, research director at XTB.

"Stocks are moving higher on news of a ceasefire between Iran and Israel and the idea that this will remain a short-lived war, rather than a long and drawn out conflict," said Chris Brigati, chief investment officer, SWBC.

Investors took on risk, selling off the dollar =USD that dipped 0.4% and provided some lift to most EM currencies.

MSCI's index for regional currencies .MILA00000CUS rose 0.4%, set for its biggest single-day jump in a week, while the regional stock gauge .MILA00000PUS leapt 1.7%, poised for its first win in six sessions.

The currency in Chile CLP=, the world's largest copper producer, gained 1.3%, tracking copper prices at two-week highs. The peso had logged a sharp fall on Monday.

Meanwhile, the International Monetary Fund urged structural reforms to revive Chile's economic growth.

In Mexico, the peso MXN= strengthened 0.6% and stocks .MXX rose 1.1%. Fresh data showed headline inflation rising as expected in the first half of June, bolstering bets that the central bank will continue trimming interest rates.

Analysts surveyed by Reuters see Banxico delivering another 50 basis point rate cut on Thursday, but the bank faces a tricky path as inflation races ahead of its 3% target.

Beneath the surface, Mexico's economy narrowly avoided a technical recession in the first quarter and now contends with soft domestic demand and anxiety over U.S. trade policy.

Meanwhile, Mexico's government took steps to shore up its finances, executing a $6.8 billion debt operation in international markets—slashing its dollar-denominated external debt due between 2027 and 2031 by 15% and strengthening its debt profile.

Meanwhile, Brazil's central bank signaled a potential pause in rate hikes, noting that much of its "particularly quick and very firm" tightening cycle has yet to take effect.

Brazil's real BRL= slipped 0.3% against the greenback, while its stocks .BVSP were 0.6% higher.

Colombia's peso COP= edged up 0.2%, buoyed by the weakness in the dollar, as oil prices fell about 5% on news of the ceasefire. O/R

This week, investors are also watching for rate decisions from Argentina and Colombia.

Investors were also digesting debt issuance from several EMs, including Turkey and Chile, while Barbados announced the results to its first conventional international bond sale in 15 years, as per a report.

Key Latin American stock indexes and currencies: