EMERGING MARKETS-LatAm currencies inch higher as yen intervention jitters weaken dollar

By Purvi Agarwal and Johann M Cherian

Jan 26 (Reuters) - Latin American currencies inched higher on Monday as the U.S. dollar slid on investor speculation of possible Japanese intervention in the currency market to shore up the struggling yen.

The yen JPY= gained 1% against the U.S. dollar and was also sharply higher against major currencies in Latin America JPYBRL=, JPYMXN=, JPYCOP=.

Further fueling the speculation through last week, the New York Federal Reserve conducted rate checks, sources told Reuters, raising the chance of joint U.S.-Japan intervention.

MSCI's index tracking LatAm currencies .MILA00000CUS added 0.2% and clinched a record high, building on six weeks of gains logged on Friday.

Analysts at Morgan Stanley believe that the Bank of Japan's focus is on inflation and growth fundamentals but, "domestic pressure from a rapidly weakening currency can never be ignored."

"The sharp reversal in the yen added an extra twist, as FX positions were directly affected, and there was a market narrative about how coordinated any intervention might have been," they said.

UBS strategists expect volatility in the FX space until Japan's February 8 elections.

The U.S. Fed is due to announce its rate decision later this week, which is also likely to influence investor sentiment.

Meanwhile, Ukraine's bonds, which had slipped more than 1 cent in the previous session, rebounded.

The one maturing in 2035 XS2895056369=TE was up 1.6 cents on the dollar, after a U.S. official said more discussions between the U.S., Russia and Ukraine were expected in Abu Dhabi the coming Sunday.

Russia's rouble RUB= slipped 1.3% against the dollar, over-the-counter market data showed.

However, territorial issues remain key for Russia in the peace talks, even as Ukraine said that a U.S. document on security guarantees was completely ready.

Back in LatAm, Brazil's real BRL= rose 0.2% against the greenback, while stocks .BVSP shed 0.3%.

Data showed Brazil's current account deficit ended 2025 broadly in line with the previous year, reversing a deterioration seen earlier in the year.

Investors were also parsing through details from a phone call between Brazilian President Luiz Inacio Lula da Silva and his U.S. counterpart Donald Trump. The two leaders agreed to meet in Washington.

Mexico's peso MXN= gave up initial gains and was last flat, while local stocks .MXX advanced 1%.

Chile's peso CLP= advanced 0.4% against the dollar, while Peru's sol PEN= inched up 0.1%. The rise was partially helped by copper prices that rose to an over-one-week high.

MSCI's index tracking stocks in Latin America .MILA00000PUS advanced 0.4% to a more than seven-year high, on track for its sixth session of gains.

Both MSCI's indexes tracking assets in LatAm logged gains last week after U.S. President Donald Trump walked back his tariff threats to Europe over Greenland and ruled out acquiring the territory by force, allaying some geopolitical uncertainty.

Surging commodity prices also helped lift stocks in resource-rich countries in Latin America last week.

Conversely, Colombia's peso COP= fell 1.4%, ahead of a local monetary policy decision later in the week. Analysts polled by Reuters anticipate a rate hike - the first since April 2023.

Ecuador announced the issuance of new 8-year and 13-year debt as investors tendered some $4.6 billion of its 2030 and 2035 step-up notes.

Key Latin American stock indexes and currencies: