EMERGING MARKETS-LatAm FX down, stocks rise as investors weigh US-Iran tensions

By Purvi Agarwal and Ragini Mathur

Feb 19 (Reuters) - Most Latin American currencies weakened against the dollar on Thursday, while regional equities gained, as investors navigated escalating geopolitical tensions that pushed oil prices higher.

MSCI's index tracking currencies in the region .MILA00000CUS fell 0.5%, while the stocks equivalent .MILA00000PUS was 0.3% higher.

Emerging market assets have largely traded in a narrow range this week, with many regional markets such as Brazil and Argentina closed for holidays.

GEOPOLITICAL RISKS RESURFACE

Geopolitical tensions that appeared to ease last week were back on the radar, with investors closely eyeing heightened military activity in the oil-rich Middle East.

U.S. President Donald Trump warned Iran on Thursday that "bad things" would happen if it did not reach a deal over its nuclear program, while appearing to set a 10-day deadline before his country might take action.

Jason Tuvey, deputy chief emerging markets economist at Capital Economics, said potential "strikes on Iran would risk causing oil prices to jump and threaten to boost inflation in much of the world, reducing the pace or number of interest rate cuts by major central banks."

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

Differences between the U.S., 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 were marginally lower on the dollar after falling over 1 cent in the prior session.

BRAZILIAN ASSETS OUTPERFORM PEERS

Across Latin America, most currencies declined as the dollar firmed for a fourth consecutive session, after data signaled a resilient U.S. labor market.

However, Brazil's real BRL= appreciated 0.2% and stocks .BVSP rose 1.1% in the market's first full trading session of the week.

Economic activity in the country expanded 2.5% in 2025, data from its central bank showed, a pace slower than last year but once again surpassing initial forecasts helped by a booming farming sector.

Mexican .MXX and Colombian .COLCAP equities advanced, with gains in oil-exporting nations coinciding with a jump in crude prices to a six-month high.

Additionally, minutes from the Bank of Mexico's February 5 meeting revealed that most board members expect the inflationary impact of new taxes and tariffs to be temporary.

The currency of the world's largest copper producer, Chile CLP=, weakened 0.2%, while stocks .SPIPSA fell 0.5% to their lowest level in a month as prices of the red metal tumbled.

Peru's stocks .MXNUAMPESCPGPE gained 0.3%. The country's Congress had elected Jose Balcazar as the new interim president on Wednesday following the removal of Jose Jeri.

"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: