EMERGING MARKETS-Latam FX gains on weak dollar, stocks jump as risk sentiment improves

By Purvi Agarwal and Johann M Cherian

Jan 27 (Reuters) - Latin American currencies and stocks gained on Tuesday, as the dollar weakened and risk appetite improved globally, while Brazilian assets advanced after a regional inflation report.

MSCI's index tracking Latam currencies .MILA00000CUS was up 0.7%, putting it on track for a seventh consecutive session of gains, its longest winning streak since late November.

Traders globally are on alert for potential coordinated intervention in the currencies market by authorities in the U.S. and Japan to support the yen. The dollar index =USD fell 0.9% in its fourth session of declines.

The U.S. Federal Reserve will also commence its two-day meeting, with a decision scheduled on Wednesday that could set the tone for global markets this week.

Meanwhile, Brazil's real BRL= gained 1.4% to its highest level since late May, while stocks in Latin America's biggest economy climbed 1.8%, racing past 182,000 points for the first time.

Government data showed Brazil's annual inflation ticked up in early January but came in broadly in line with expectations ahead of the central bank's interest rate decision later this week.

The data supports the government's fight against sticky inflation in the economy that has kept interest rates at 15%, the highest in nearly two decades.

"This reading reinforces our perception that the bulk of the deflationary pressure coming from tradable goods is already past us," said a group of analysts at Citigroup, led by Ernesto Revilla. "... Suggesting that the softening of inflation will become much more linked, from now on, to components that are linked to the domestic economic cycle."

Focus was also on a monetary policy decision out of Chile, where the central bank is widely expected to hold interest rates. The peso CLP= firmed 0.7%, set to extend its rally to a sixth session, while local stocks .SPIPSA gained 0.7%.

Mexico's peso MXN= also appreciated 0.6%, tracking higher crude oil prices, while stocks .MXX slipped 0.2%.

Investors assessed data that showed the country registered a trade surplus in 2025.

MSCI's stocks gauge for the region .MILA00000PUS surged 1.8% in its seventh session in the positive, set for its longest streak since April last year.

Argentine stocks .MERV surged 3.5% and international bonds advanced. The country's risk index fell below 500 basis points for the first time since mid-2018, as the central bank's repurchase of reserves gave investors confidence in government bonds.

Moody's Ratings, on Monday, upgraded its rating on Ecuador to "CAA1" from "CAA3", hours after the country launched a $4 billion international debt sale.

The country's bonds rose sharply a day after the country sold $4 billion in its first tapping of international capital markets since its 2020 restructuring, partly to buy back $2.5 billion of a 2030 note and $575 million of a 2035 note.

The operation pushed Ecuador's 2026 financing gap into negative territory, according to JPMorgan.

MSCI said it would "consult" on a reclassification of Greece to the developed markets status, with analysts at J.P.Morgan estimating the move in late-August.

Key Latin American stock indexes and currencies: