Brazil's real recovered from three sessions of sharp losses on Monday, while broader Latin American markets kept to the sidelines as a second wave of COVID-19 infections dampened sentiment.

The real was supported by data showing Brazilian industrial confidence rebounded sharply in June, the biggest rise ever. Still, the readings were consistent with levels seen in severe recession.

The country also reported a record budget deficit for May as the pandemic hammered tax revenues and triggered a surge in government spending.

Rising coronavirus cases in the United States rattled hopes for a smooth emergence from pandemic-related lockdowns, while the possibility of new lockdowns looked to upset already precarious economic growth.

With cases in Latin America also spiking exponentially, investors were hesitant to capitalize on momentary weakness in the dollar by buying into regional currencies.

Mexico's peso fell about 0.4%, tracking softer oil prices as concerns over demand weighed on the crude market.

Latin American stocks and currencies had marked a third straight week of losses as markets weighed increasing COVID-19 cases against the possibility a swift economic recovery from the pandemic.

Regional risk assets now appeared to be sticking to a tight trading range, in anticipation of further progress against the COVID-19 outbreak.

"With global Covid-19 cases breaching the 10 million level over the weekend, and global deaths exceeding half a million, early re-openings are looking as misguided as they always did, and threaten to send some countries/states back to re-closure," ING economists wrote in a note.

Brazilian stocks gained about 0.6%, while the MSCI's index of regional stocks rose 0.4%.

The BlackRock Investment Institute on Monday downgraded emerging market equities to "underweight," citing uncertainty over the pandemic and concerns central banks in the space may have limited room to respond appropriately.

Colombian and Chilean markets were closed for a holiday.