EMERGING MARKETS-LatAm assets subdued as commodity prices slip, dollar firms

By Twesha Dikshit, Ragini Mathur and Johann M Cherian

Jan 16 (Reuters) - Currencies of resource-rich Latin America were subdued on Friday, tracking weakening prices of base and precious metals, while signs of resilience in the U.S. economy buoyed the dollar.

MSCI's indexes tracking Latin American equities .MILA00000PUS and currencies .MILA00000CUS were flat, but both indexes were on track to end the week higher. The currencies index had hit a record high earlier this week, while the stocks gauge touched a six-year high.

While some global risks remained with U.S. President Donald Trump's insistence on acquiring Greenland and European attempts to counteract, the cooling rhetoric on military intervention in Iran and previous allusions of firing Federal Reserve Chair Jerome Powell allayed some investor fears.

"LatAm's strong export performance has been driven by a combination of increasing prices, volumes and supportive geopolitical situation," said Andres Abadia, chief Latin American economist at Pantheon Macroeconomics.

"External noises have dragged down commodity prices. Economies like Brazil and Chile and even Argentina, which is closely linked to agricultural prices but not to metal commodities, have also suffered with the news."

JPMorgan flows data showed EM equity funds clocked record inflows this week at over $9.7 billion, the second-largest weekly inflow in tracking history. LatAm inflows came in at over $541 million, highest since March 2018.

Markets have navigated a range of geopolitical events to kickstart the year including tensions in Venezuela, Iran and Greenland, but have proven resilient with many global indexes trading at all-time highs.

EQUITIES, CURRENCIES FALTER AS COMMODITY RALLY COOLS

Colombia's benchmark index .COLCAP was the only bright spot, gaining 2%, and was set to end the week up by more than 5%. Copper-exporter Peru's index .MXNUAMPESCPGPE inched up 0.5%, limited by declines in the metal's price but was set to end the week higher.

Markets were also bracing for a fresh wave of elections in Brazil and Colombia later this year, ahead of which a report said Morgan Stanley's top fund shunned both countries' local debt.

Brazil's equities .BVSP dropped 0.6% as options on the index expired. The IBC-Br economic activity index, a proxy for GDP, gained 0.7% in November month-on-month, beating expectations of a Reuters poll of economists.

Brazil's Brava Energia BRAV3.SA fell almost 5% after the oil firm said it would buy stakes in two offshore fields from Malaysia's Petronas.

Argentina's shares .MERV edged up 0.3%. The country logged a second straight annual fiscal surplus in 2025, the economy minister said. The peso ARS= strengthened 0.9%.

Also limiting regional currency gains was a stronger dollar =USD on expectations that the Federal Reserve could likely leave interest rates unchanged when it meets later in the month. Investors were also speculating on who could be the central bank's next chair. FRX/

The Chilean peso CLP= was down 0.4%, tracking copper prices. The Mexican peso MXN= and Brazilian real BRL both were marginally lower.

In trade news, the landmark European Union and Mercosur free trade agreement was set to be signed in Paraguay on Saturday after 25 years of negotiations, in the largest such trade accord for the EU.

In Beijing, Canada and China struck an initial trade deal to slash tariffs on electric vehicles and canola.

Key Latin American stock indexes and currencies at 2002 GMT: