By Ragini Mathur, Purvi Agarwal and Shashwat Chauhan
July 17 (Reuters) - Latin American currencies broadly weakened against the dollar on Thursday as investors assessed U.S. President Donald Trump's remarks about Federal Reserve Chair Jerome Powell's tenure and ongoing U.S. trade developments.
The dollar index =USD advanced 0.3% after a dip on Wednesday, when reports suggested Trump was considering removing Powell. While Trump later denied the claims, he did not rule out the possibility entirely.
Wednesday's decline in the dollar led to gains for most Latin American currencies, but a reversal in the greenback on Thursday pushed them back into negative territory.
The dollar's rebound was supported by stronger U.S. retail sales data and steady weekly jobless claims, boosting the currency's performance globally.
"Today's US data is generally on the firmer side in terms of activity and jobs ... overall, it supports the view that there is little pressing need for another interest rate cut from the Federal Reserve," James Knightley, chief international economist at ING, said in a note.
Mexico's peso MXN=, which posted its biggest single-day gain in two weeks on Wednesday, declined 0.3%, while Colombia's peso COP= fell 0.2%.
Mexican equities .MXX edged up 0.2%, but gains were capped by a 6.8% drop in Walmart's Mexico unit WALMEX.MX, which reported a 10% decline in second-quarter net profit, missing analysts' expectations.
Brazil's real BRL= reversed initial losses to rise 0.4% to 5.54 per dollar.
The country's highest court upheld much of a contentious presidential decree raising the financial operations tax on Wednesday.
Brazil remains in focus after Trump imposed 50% tariffs on the country. In response, Brazilian President Luiz Inacio Lula da Silva said on Thursday that he would not take orders from a "gringo".
The Economic Commission for Latin America and the Caribbean (ECLAC) said that foreign direct investment in Latin America grew 7.1% to $188.96 billion in 2024, although new investment interest has stagnated.
MSCI's index of Latin American stocks .MILA00000PUS climbed 0.6%, with gains across major bourses including Brazil .BVSP and Argentina .MERV.
Markets also monitored trade signals from Trump, who suggested being "very close" to a deal with India and indicated potential progress with Europe but remained cautious about prospects with Canada.
The U.S. has already secured agreements with the UK, China, Vietnam, and Indonesia, with other negotiations ongoing ahead of an August 1 tariff deadline.
"Mexico and emerging markets in Asia face the highest direct exposure, while other EMs will be indirectly affected through lower investment and potential weakening in global demand," said analysts at S&P Global Ratings.
Separately, the head of the International Monetary Fund's mission to Ethiopia said that the government is engaging with bondholders on potential paths to restructuring its sole international bond.
Ethiopia, which defaulted on its bond in 2023, has been in a standoff with a group of investors holding its $1 billion Eurobond XS1151974877=TE.
Key Latin American stock indexes and currencies:
Equities | Latest | Daily % change |
MSCI Emerging Markets .MSCIEF | 1241.7 | 0.18 |
MSCI LatAm .MILA00000PUS | 2282.68 | 0.57 |
Brazil Bovespa .BVSP | 135656.6 | 0.11 |
Mexico IPC .MXX | 56639.33 | 0.24 |
Argentina Merval .MERV | 2066253.02 | 1.92 |
Chile IPSA .SPIPSA | 8187.22 | 0.43 |
Colombia COLCAP .COLCAP | 1743.62 | 2.47 |
Currencies | Latest | Daily % change |
Brazil real BRL= | 5.5478 | 0.37 |
Mexico peso MXN= | 18.7637 | -0.29 |
Chile peso CLP= | 962.57 | 0.4 |
Colombia peso COP= | 4017.4 | -0.18 |
Peru sol PEN= | 3.5595 | -0.41 |
Argentina peso (interbank) ARS=RASL | 1273 | -0.79 |
Argentina peso (parallel) ARSB= | 1275 | 1.57 |