Latam FX subdued as trade uncertainty persists; stocks gain

Most Latin American currencies moved little against the dollar on Tuesday as investors remained on edge after a recent escalation in the US-China trade dispute, although an index of the region's stocks snapped a three-day run of losses.

Brazil's real currency - which, bar Argentina's peso , has lagged its Latin American peers with a near 8% loss this month - steadied at 4.15 per dollar.

Brazil's central bank president, Roberto Campos Neto, said the economy was stable or expanded slightly in the second quarter, but said the pace of growth should pick up, albeit gradually.

The country is also facing pressure from world leaders because of an environmental crisis due to a record number of fires in the Amazon rainforest. After European leaders threatened to tear up a trade deal with South America last week, Brazil's Foreign Trade Secretary Marcos Troyjo said the EU-Mercosur trade pact was still under review.

Other currencies in the region were more subdued, with the Mexican peso, the Colombian peso and the Chilean peso falling between 0.16% and 0.6% as investors assessed conflicting comments from US and Chinese officials over the drawn-out trade dispute.

"Should our view of further escalation and slower global growth play out, there would be more pain in the risk market. In EMFX, we remain defensive," Morgan Stanley analysts wrote in a note.

US President Donald Trump sought to ease tensions by predicting another round of talks with Beijing on Monday, although China's foreign ministry said it had not received any recent phone call from the United States on trade.

Stock markets were a bright spot, with the MSCI's index of Latin American equities gaining about 1% as Sao Paulo-listed shares tacked on 1.4%.

Mexico's main stock index also jumped more than 1% after the government said it would save $4.5 billion from a deal struck with a group of companies over a dispute surrounding contracts for gas pipelines issued under the previous administration.

Argentina's peso dropped 0.5% to trade at 55.58 per dollar. Traders said the central bank sold two rounds of $50 million from its own reserves at a rate of 55.44 pesos per dollar and 55.4729 pesos per dollar, respectively.

The central bank is selling reserves to intervene in the foreign exchange market and defend the beleaguered peso after opposition candidate Alberto Fernandez netted a significant lead over incumbent Mauricio Macri in the Aug. 11 primary vote.