EMERGING MARKETS-Latam FX ticks higher as markets await more US trade developments

By Ragini Mathur and Purvi Agarwal

July 2 (Reuters) - Latin American currencies inched higher in volatile trading on Wednesday, as investors monitored U.S. trade negotiations ahead of President Donald Trump's July tariff deadline.

Investors remained on edge as Trump said he was not considering extending the deadline for countries to negotiate trade deals with the United States. The status of talks with Japan remained unclear, while a deal was expected with India and struck with Vietnam.

The dollar index =USD edged 0.2% higher after nine sessions of declines, its longest losing streak since 2008, though concerns remained over the potential impact of Trump's massive tax-cut and spending bill, estimated to add $3.4 trillion to the country's debt pile.

Most currencies in Latin America swung higher after initial losses, though Mexico's currency MXN= lagged with a 0.3% decline.

A Reuters poll showed that the rallying Mexican peso is set to slip after Trump's tariff pause expires next week.

Copper producer Chile's peso CLP= climbed 0.2%, while Peru's sol PEN= inched 0.4% up, as prices of the red metal rose.

Brazil's real BRL= also reversed its initial declines and was last up 0.7% to 5.42 per dollar.

Investors have viewed Latin American assets as a safe haven from Trump's tariffs, except for Mexico, as exports from Latin American countries, excluding Mexico, to the United States are relatively smaller compared with those from Asian economies.

MSCI's index for Latin American currencies .MILA00000CUS was last up 0.2%, having gained nearly 18% in the first six months of 2025, its most since 2009, also benefiting from a shift out of U.S. assets.

"We see good reasons for many EM currencies to maintain their strong performance (in the second half) ... a lot has resulted from the dollar simply being outplayed, but a strong counterattack by the USD is not in our playbook," said HSBC Global Research analysts in a note.

Analysts added that investors were more focused on upcoming elections in the region, and that until those elections pointed to "market-friendly outcomes", the short-term concerns may be overlooked.

The region's stocks gauge .MILA00000PUS also reversed its initial course to advance 0.4% on Wednesday.

Heavyweight Brazilian shares .BVSP fell 0.3%, as losses in financials and utilities weighed on the index.

Elsewhere in emerging markets, Poland's central bank delivered a surprise 25 basis-point cut to its main interest rate, while also lowering its inflation expectations for the upcoming years.

The Polish zloty EURPLN= shed 0.4% against the euro.

Highlights:

Mercosur countries agree to expand exemptions to foreign tariffs

Emerging market debt sale surge defies global turmoil amid signs of de-dollarisation

*Brazil's central bank needs time to assess data after signaling pause in rate hikes, official says

Key Latin American stock indexes and currencies: