EMERGING MARKETS-Latam FX inches down, stocks gain with focus on Trump's tax bill, tariff talks

By Ragini Mathur, Purvi Agarwal and Shashwat Chauhan

July 1 (Reuters) - Most Latin American currencies inched lower and stocks gained on Tuesday as investors assessed the implications of U.S. President Donald Trump's tax reform legislation passing a crucial Senate vote, while trade negotiations with the U.S. remained in focus.

The dollar index =USD - flat on the day - was pinned near its lowest level since March 2022 after the Republican-controlled U.S. Senate passed Trump's tax-and-spending bill by the narrowest of margins.

The package will enshrine many of Trump's domestic priorities into law while adding $3.3 trillion to the national debt.

Investors were also closely watching for any progress on the global trade front, as Trump's July 9 tariff deadline loomed.

"One of the key sources of uncertainty is the July 9 deadline set by Washington ... while markets maintain a moderately optimistic stance, a resurgence of protectionism cannot be ruled out if agreements are not reached," said Antonio Di Giacomo, financial markets analyst for Latam at XS.

In the latest on the matter, Trump said he was not thinking of extending the July 9 deadline for countries to negotiate trade deals with the U.S., and continued to express doubt that an agreement could be reached with Japan.

Brazil's real BRL= was among the top decliners in Latin America, down 0.6% after hitting its highest since October 2024 in the last session.

Brazil's government filed a lawsuit with the Supreme Court challenging Congress' decision to overturn President Luiz Inacio Lula da Silva's decree raising the so-called IOF tax .

Lula hiked the tax levied on certain credit, foreign-exchange and private pension plan operations in May as a way to boost revenue and limit spending freezes needed to comply with the government's fiscal framework.

Mexico's peso MXN= also dipped 0.1%, though was hovering near its highest since August 2024 and was set to snap a six-day winning streak.

Colombia's peso COP= jumped 1.6% in light trading a day after a public holiday, while MSCI's index for Latin American currencies .MILA00000CUS was last up 0.2%.

The Chilean peso CLP= breached its highest level in three months earlier in the day, though pared some gains and was last up 0.4%.

Regional stocks, meanwhile, churned higher, with MSCI's index tracking regional equities .MILA00000PUS up 0.4%. The index briefly hit its highest in over ten months.

Brazilian shares .BVSP were up 0.6% with shares of Embraer EMBR3.SA gaining 4.5% to hit an intraday record high after Airline SAS agreed to buy aircraft worth around $4 billion.

EM assets have been a subject of investor interest this year as mounting economic problems in the U.S. pushed them to diversify and find value in depressed EM assets.

BofA Global Research observed that EM flows were better than they seemed, and would continue to improve.

EM growth is holding up better than developed markets, and the dollar weakness was the major driver, it said.

HIGHLIGHTS

** Chile speeds up permitting for mining and other investment projects

** Mexico remittances dip 5% in May as US mulls tax

** Peru's economy expected to grow up to 3.5% in 2025, minister says

Key Latin American stock indexes and currencies: