BRASILIA: Latin American markets were largely subdued on Tuesday, with indexes tracking the region’s stocks and currencies set for steep annual declines, as prospects for fewer US rate cuts lifted the dollar and capped a turbulent year for the region.
Trading was thin on the last day of the year, with markets closed in Brazil and most markets scheduled to be shut on Wednesday.
Mexico’s peso weakened 0.3% on the day, and is on track for its worst year since 2008 as the Bank of Mexico looks set to continue its easing cycle, and concerns rise about trade with the United States.
Mexico’s main stock index was up 0.4% on the day. It saw the steepest yearly declines among regional bourses, down about 15%, the most since 2018.
MSCI’s gauge of regional stocks and currencies edged 0.3% and 0.2% higher, respectively.
Latin American markets have sharply underperformed broader emerging markets this year, with the regional stocks and currency indexes set for yearly losses of 30.6% and 11.2%, respectively.
The currency index broke a two-year winning streak and saw its worst annual loss since 2020. It is the worst yearly decline since 2015 for Latin American stocks.
The US dollar and Treasury yields have jumped in December after the US Federal Reserve flagged a more cautious pace of interest rate reductions in 2025. That has weighed heavily on emerging market assets.
Latin American economies in particular have struggled this year with slowing growth in top commodity consumer China, political upheaval, rising inflation and fewer US rate cuts than previously expected.
Heading into 2025, most investors continue to expect fewer Fed cuts, as well as the policies of incoming US President Donald Trump to keep the dollar supported, further diminishing returns on emerging market investments.
“The dollar index is now consolidating gains at the highest levels in more than two years, and could continue to extend gains on the back of a gradually less dovish Fed outlook,” said Ipek Ozkardeskaya, a senior analyst at Swissquote Bank.
Most currencies in the region were set for annual losses against the dollar. Brazil’s real, the worst regional performer, slumped 21.5% against the dollar and is hovering around record lows in its worst year since 2020.
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