EMERGING MARKETS-Latam FX lower as Trump's Fed pick lifts dollar; commodities weigh on stocks

By Purvi Agarwal

Jan 30 (Reuters) - Latin American currencies and stocks lost ground on Friday as U.S. President Donald Trump's nomination for the Federal Reserve chair supported the dollar, which pressured commodity prices.

Trump on Friday nominated former Fed governor Kevin Warsh as his pick to lead the U.S. central bank after Chair Jerome Powell, a candidate markets expect will stop short of the aggressive policy easing associated with other candidates.

"While markets are probably relieved that a well-known, former Fed official has been nominated as the next Fed chair, they are also likely to pivot to concerns that he won't be as dovish as they were expecting the new chair to be," said Chris Zaccarelli, chief investment officer for Northlight Asset Management.

The move supported the dollar index =USD, that has been trading around four-year-lows this week, and weakened currencies in emerging markets, including Latin America.

Brazil's real BRL= weakened 0.7% against the greenback. Data showed Brazil's unemployment rate dropped to a record low in the three months through December, despite borrowing costs at a near 20-year high.

Chile's peso CLP= fell 0.8%. The currency in the world's largest copper producer was impacted by prices of the red metal that fell over 1%.

Currencies in Mexico MXN= and Colombia COP= also depreciated 0.5% and 0.7% respectively. Colombia's central bank is expected to raise interest rates later in the day, for the first time since 2023.

A higher dollar prompted a sharp fall in gold prices and signs of dialogue between the U.S. and Iran brought oil prices lower. O/R GOL/

Jack Janasiewicz, portfolio manager at Natixis IM Solutions said that Warsh has proposed broad changes at the Fed, so "today's reaction in the markets... pressure in the precious metals complex is a reflection of the market repricing some of these potential policy changes."

These weighed on resource-heavy equity indexes in the region, with stocks in Mexico .MXX and Chile .SPIPSA retreated 1.2% and 0.8% respectively.

Brazilian stocks .BVSP were flat, but were set for their best monthly performance since November 2020.

MSCI's index tracking stocks in the region .MILA00000PUS slipped 0.9%, and the currencies equivalent .MILA00000CUS inched 0.2% higher. Both indexes were set for their biggest monthly jump in years.

Elsewhere in EMs, Ukraine bonds broadly rallied over 1 cent on the dollar each, with the one maturing in 2035 XS2895056369=TE up 1.2 cents.

Markets cheered a week-long halt to airstrikes on Ukraine ahead of the weekend where more talks are expected between the warring countries.

Ethiopia will renegotiate a deal to restructure its $1 billion international bond after the country's official creditors, including China and France, said a proposed agreement was inadequate. The bond, maturing in 2035 XS1151974877=TE, fell 1.5 cents on the dollar.

The heads of Indonesia's financial regulator and stock exchange resigned suddenly in a shake up that followed this week's $80 billion stock market rout and mounting concerns over transparency and governance. The index .JKSE closed 1.2% higher after falling over 8% in the last two sessions.

Key Latin American stock indexes and currencies: