EMERGING MARKETS-LatAm FX, stocks decline as geopolitical jitters dampen sentiment

By Purvi Agarwal

Feb 19 (Reuters) - Most Latin American currencies weakened and stocks were mixed on Thursday as a firmer dollar and rising geopolitical tensions sent investors flocking to safe haven assets, though Brazilian assets bucked the trend.

MSCI's index tracking currencies in the region .MILA00000CUS fell 0.6%, while the stocks equivalent .MILA00000PUS dipped 0.5%.

EM assets have largely been trading in a range this week as many markets in the region, including Brazil, were closed for holidays.

GEOPOLITICS DAMPEN SENTIMENT

Geopolitical tensions that showed signs of easing last week, were back on the radar with investors closely watching for any updates that could impact the oil market.

The White House said on Wednesday that nuclear talks with Iran were showing progress but the two countries were still far apart on some issues. Markets have not ruled out broader military action.

"While there might be some initial volatility from conflict in Iran, we think markets would look past it pretty quickly as any U.S. war plans would almost certainly include actions to quickly move to protect the Strait of Hormuz, which probably poses the biggest vulnerability for market stability," said Dennis Follmer, chief investment officer at Montis Financial.

Separately, two days of peace talks between Ukraine and Russia ended on Wednesday without a breakthrough as Ukraine's President Volodymyr Zelenskiy said he was dissatisfied with the outcome while Washington reported "meaningful progress".

The differences in positions held by the United States, Russia and Ukraine on key issues have led analysts to believe that a resolution is not likely in the near term.

Ukraine's international bonds broadly fell over 1 cent on the dollar each for a second consecutive session, with the one maturing in 2035 XS2895056369=TE down 1.3 cents, according to Tradeweb data.

BRAZILIAN ASSETS BUCK THE TREND

Back in LatAm, most currencies declined against the dollar, which firmed after U.S. weekly jobless claims supported the idea of a stable labor market, and minutes from the Federal Reserve's last meeting showed policymakers were not in a rush to cut interest rates.

However, Brazil's real BRL= gained and stocks .BVSP rose 0.1% each in the first full trading session of the week.

Economic activity in Brazil expanded 2.5% in 2025, central bank data showed, easing from the previous year's pace but once again surpassing initial forecasts with the help of a booming farming sector.

The currencies of Mexico MXN= and Colombia COP= depreciated 0.5% and 0.3% respectively, while stocks were little changed. The moves come despite oil prices hitting their highest since August on rising U.S.-Iran tensions.

The currency in the world's largest copper producer, Chile CLP=, weakened 0.6% as prices of the red metal tumbled over 1%. Stocks .SPIPSA lost 1.2%, falling to their lowest level in over a month.

Peru's stocks .MXNUAMPESCPGPE gained 0.2%. The country's congress elected Jose Balcazar as the new interim president on Wednesday.

"Balcazar's profile —a dismissed judge expelled from his bar association, with pending investigations shielded by parliamentary immunity — reinforces the electorate's conviction that the political class is irredeemable," said Diego Pereira, an analyst at JPMorgan.

Key Latin American stock indexes and currencies: