Latam markets set to end week broadly lower against resurgent dollar

* Mexico SA jobless rate 2.7% in November * Chile’s peso drops over 1% * PBOC says will cut rates at proper time * Latam stocks index down 0.9%, FX index flat (Updates with afternoon trading prices) By Lisa Pauline Mattackal Jan 3 (Reuters) – Most Latin American currencies were set for weekly losses on Friday, with the U.S. dollar looking set to continue its strong performance in 2025 amid inflationary pressures and expectations for relatively higher for longer U.S. interest rates. MSCI’s index of regional currencies held steady at 2639.26 points, though set for a weekly loss of about 0.3%, its third straight weekly decline. MSCI’s index of Latin American stocks lost 0.9% on the day, hovering near 2020 lows and set for its fourth consecutive week of declines after ending 2024 over 30% weaker. Chile’s peso dropped 1.2% on the day. It was on track for its worst week since October and trading at an over a two-year low. Caution dominated the first few trading days of the year, with the dollar hovering at two-year highs, supported by expectations of a slower pace of rate cuts from the U.S. Federal Reserve. That has raised the risk of further weakness in EM currencies and capital outflows as riskier asset classes look less attractive to investors. Donald Trump’s return as U.S. president later this month has also weighed on the outlook for EMs, particularly his stated plans for hefty global import tariffs that could weigh especially on economies such as China and Mexico. “U.S. growth, tax cuts and tariffs against China will likely strengthen USD in H1 2025,” analysts at Continuum Economics said. “However USD is more overvalued than (during) Trump’s first term and USD will likely see a H2 reversal against (developed market) majors and select emerging markets.” On the day, Mexico’s peso lost 0.5% against the dollar, set to fall over 1.7% for the week and giving back gains from the prior session. Data showed its seasonally adjusted jobless rate was 2.7% in November. Argentina’s main stock index was 0.6% higher on the day, hovering at record highs and looked set to continue its banner run from 2024 when it soared over 172%. It was set to rise more than 5% for the week, the best performer in the region. Brazil’s real weakened 0.4% against the greenback, though set for its first weekly advance in three. Elsewhere, China’s central bank said it will cut banks’ reserve requirement ratio and interest rates at the “proper time” during a quarterly meeting of its monetary policy committee held last week, according to a statement published on Friday. HIGHLIGHTS ** China’s cenbank warns mutual funds against feeding bond frenzy, sources say ** Argentina’s state airline cuts staff, routes, passenger perks ahead of possible sale Key Latin American stock indexes and currencies: MSCI Emerging Markets 1072.7 0.16 MSCI LatAm 1843.6 -0.86 Brazil Bovespa 118591.01 -1.28 Mexico IPC 49119.82 -1.3 Chile IPSA 6700.17 0.27 Argentina Merval 2710648.9 0.557 9 Colombia COLCAP 1398.05 -0.11 Brazil real 6.1751 -0.38 Mexico peso 20.6731 -0.45 Chile peso 1015.84 -1.22 Colombia peso 4345.5 0.63 Peru sol 3.767 -0.37 Argentina peso 1032 0.00 (interbank) Argentina peso (parallel) 1185 2.53 (Reporting by Lisa Pauline Mattackal and Shashwat Chauhan in Bengaluru; Editing by Elaine Hardcastle and Alistair Bell)