Brazil's real last week reached its strongest level since August 2008 and is expected to carve out new highs. Mexico's peso is seen firming after staking out its strongest levels since October 2008.
Although the dollar gained on Monday, investors may soon turn to concerns about an upcoming congressional debate over lifting the US debt ceiling, and that could weaken the greenback.
Meanwhile, investors will continue to test Brazilian authorities' resolve to contain currency gains after a recent surge took the real within less than one percent of trading at its strongest since 1999, when the currency was floated.
"The dollar remains, in my opinion, with a downward bias. We will soon start seeing more downward pressure," said Mario Battistel, manager of Fair Exchange Broker.
The real bid 0.51 percent weaker at 1.58 per dollar on the local spot market.
Before Monday's losses, the real gained more than 5 percent in the last two weeks as the market brushed off the government's latest set of taxes meant to contain currency gains hurting local manufacturers.
Investors are gaming low interest rate loans in currencies like the dollar and yen against the payoff of Brazil's double-digit yields.
Analysts are divided as to whether Brazilian authorities are willing to allow further appreciation to help contain inflation, or if they have just run out of good options to contain the real's gains.
Some analysts are betting the currency could firm to as strong as 1.50 per dollar. Others expect gains to be limited to 1.55 per dollar given the threat of further government efforts.
Mexico's peso dipped 0.11 percent to 11.7482 per dollar, edging down after a 0.9 percent gain last week.
Traders pointed to support for the dollar at the 11.70 level, where option barriers are likely layered, and resistance around 11.78 per dollar.
Mexico's currency saw such a sharp depreciation during October 2008 that chart analysts have few technical levels to grab onto since the currency began to firm back below 12 per dollar. After 11.70, investors that favor the peso see a target of 11.50 per dollar.
Investors will continue to be drawn to Latin America's currencies and high-yielding debt as long as the United States is seen lagging the European Union's move last week to start hiking interest rates, analysts said.
"The peso is going to stay strong due to the excessive liquidity that is looking at the better yields here in Mexico," said Guillermo Mateos at the Banregio bank in Monterrey.
Chile's peso bid 0.21 percent weaker at 470.70 per dollar.
Chile's currency could gain further ground this week supported by bets the central bank could deliver its second straight month of an aggressive 50 basis point interest rate hike.
After trying to fight the peso's gains early this year with a $50-million-a-day dollar purchase program, the central bank has now prioritized its fight with an eroding inflation outlook and is unlikely to take any measures that could weaken the peso and further inflame consumer price pressure.
Peru's sol bid flat at 2.797 per dollar after left-wing nationalist Ollanta Humala won the first round of Peru's presidential election and looks set to face right-wing lawmaker Keiko Fujimori in a June 5 run-off.
The sol had been pressured in recent week's due to concerns that Humala would win.