EMERGING MARKETS-LatAm FX recovers, stocks mixed as commodity sell-off persists

By Purvi Agarwal and Ragini Mathur

Feb 2 (Reuters) - Most Latin American currencies strengthened against the U.S. dollar on Monday after logging declines in the previous session, while stocks were mixed, as investors digested a sharp selloff in commodity markets.

Colombian stocks .COLCAP were down 2.2%, tracking a 5% decline in oil prices, as tensions between the U.S. and Iran showed signs of a de-escalation.

On the flip side, Brazil's heavyweight index .BVSP was up 0.3%, as strength in financial and utility stocks cushioned the blow from weakness in the energy sector.

Meanwhile, Chile's equity market .SPIPSA shook off early losses to trade 0.6% higher, helping the broader MSCI Latin America index .MILA00000PUS hold steady for the session.

A rout in gold and silver prices in early trade on Monday had weighed heavily on assets in commodity-rich emerging markets such as South Africa. Since then, the selloff has eased, with stocks in Latin America seeing a milder impact.

U.S. President Donald Trump's nomination of former Federal Reserve governor Kevin Warsh on Friday provided support for the U.S. dollar, followed by a meltdown in metal prices. Markets expect Warsh would be likely to stop short of the aggressive monetary policy easing that Trump has sought.

"What may have begun as profit-taking turned into an absolute rout, leaving traders who were late to the party seriously out of pocket. The move was compounded by a sharp snapback in the U.S. dollar after the greenback hit multi-year lows," said David Morrison, senior market analyst at Trade Nation.

Beyond the LatAm region, EM investors assessed a trade deal between the U.S. and India that slashes U.S. tariffs on Indian goods to 18% from 50% in exchange for the South Asian nation lowering trade barriers and stopping its purchases of Russian oil.

"This would be the fifth trade 'deal' that India has struck in just nine months (most recently the EU) as policymakers have stepped up efforts to increase market access and, ironically, reduce economic dependence on the U.S.," said Shilan Shah, deputy chief emerging markets economist at Capital Economics.

The U.S.-listed iShares India ETF INDA.N gained 2.7%.

EM equities rallied last month as global investors poured in money at the fastest clip in years in January, with a weaker dollar and diversification away from the U.S. pointing to an extension of the rally the asset class staged last year.

CURRENCY MARKETS STAGE RECOVERY

On the FX front, most LatAm currencies appreciated against the dollar after falling in the previous session.

Colombia's peso COP= moved 1.3% higher, a day after the country's central bank hiked interest rates by 100 basis points to 10.25%, for the first time since 2023, in a move that shocked analysts.

Chile's peso CLP= was up 0.9%. Economic activity in the country rose 1.7% in December from a year earlier, central bank data showed, beating market forecasts of a 0.9% expansion.

On the flip side, Brazil's real BRL= was largely muted.

Argentina's peso ARS=RASL was among the decliners. Local newspaper La Nacion reported on Sunday that the country bought $808 million in Special Drawing Rights (SDRs) from the U.S. Treasury to meet an interest payment to the International Monetary Fund.

The broader currency gauge .MILA00000CUS was down 0.3%.

Markets in Mexico were closed for a public holiday.

Key Latin American stock indexes and currencies: