Rising oil prices lift Mexico, Colombian currencies; Latam stocks fall

Most Latin American currencies firmed against a weaker dollar on Tuesday, with rising oil prices helping Colombia's peso break a seven-session losing streak, while stocks were knocked lower by a continued rout in China shares.

MSCI's index of Latin American stocks fell 0.4%, in line with broader emerging market peers, which fell to 2021 lows as a sell-off in China and Hong Kong shares on regulatory concerns spilled over.

Brazil's Bovespa lost 0.8%, with iron ore miner Vale the biggest drag as prices for the steel-making ingredient slumped 2.8%.

Chile's IPSA extended losses for a third straight session to hit two-month lows, while Mexican shares looked to end a five-session winning streak, retreating 1% from six-week highs hit on Monday.

"A sense of caution is likely to linger across markets as investors adopt a guarded approach due to the Asian volatility and (conclusion of the) Federal Reserve policy meeting on Wednesday," said Lukman Otunuga, senior research analyst at FXTM.

Oil edges higher as tight supply outweighs virus spread

But JPMorgan said on Monday it expected emerging market equities to perform better in the second half of the year as risks around lagging vaccination campaigns and concerns over China's economic slowdown, as well as a strong US dollar, would fade.

The EM stocks index is down almost 3% so far this year and about 13% away from all-time highs hit in February.

Most Latam currencies edged higher, with currencies of crude exporters Mexico and Colombia finding support from oil prices buoyed by tight supply.

Mexico's peso extended gains to a fifth straight session, up 0.4%, while Colombia's currency rose 0.13% after losing 3% over the last seven sessions.

Latam FX rallies as US jobs data dents dollar; Colombia hit by downgrade

Anti-government protests, which originated from discontent with a tax reform bill, and underlying economic weakness from the pandemic have cost Colombia two out of three of its investment-grade debt ratings and weighed on the currency.

Brazil's real was struggling to find direction, swinging between losses and gains. It last traded up 0.3%.

The International Monetary Fund on Tuesday lowered its outlook for developing economies, citing difficulties in access to COVID-19 vaccines and lesser fiscal support than in advanced economies.