Latam FX capitalize on dollar weakness, Mexican peso at 6-week high

Mexico's peso rose to a near six-week peak on Monday, with most other Latin American currencies gaining on the back of a weakening dollar on concerns about the US economy.

The peso firmed 1.4% against the dollar. Data on Monday showed Mexico posted a record trade surplus in June as business activity began recovering from months of lockdown, but exports remained well below 2019 levels.

The dollar index hit an over two-year low due to the surging number of US COVID-19 cases, expectations of a more accommodative policy stance from the Federal Reserve, and deteriorating US-China relations.

Brazil's real rose 0.9% with a central bank survey showing the outlook for Brazil's economy improved for the fourth week in a row. Economists now expect Latin America's largest economy to shrink by 5.8% this year.

"In Brazil, short-term news flow seems to be improving: macro data has been surprising positively, virus momentum is slowing and tax reform negotiations are underway," said FX strategists at JP Morgan.

The Colombian peso snapped a three-day losing streak, with local investors eyeing an interest rate decision. Analysts expect the central bank to cut by 25 basis points at a policy meeting on Friday.

But the mood was still not entirely "risk-on," as coronavirus cases spiked around the region.

For the first time, cases in Latin America surpassed the combined infections in the United States and Canada, a Reuters tally showed on Sunday, amid a surge in Brazil, Mexico, Peru, Colombia and Argentina.

The Argentine peso retreated after the government reaffirmed on Saturday that it would not budge from its latest proposal to restructure $65 billion in debt, but signaled it would be willing to negotiate on the fine print around the deal.

Regional stock indexes tracked gains on Wall Street.

Brazil's Bovespa rose 1.8% on a materials and financials boost, while Mexico's Ipc index hit a three-week high, with cement producer Cemex jumping 9%.

The company reported a quarterly loss but said sales in the United States increased. Its Latam subsidiary reported a profit for the second quarter compared with a loss a year ago.