The peso rose 1.6% after falling nearly 5% in the last three days in the aftermath of the collapse of Silicon Valley Bank (SVB) and Signature Bank in New York.
The broader Latin American currencies index gained 0.4%, after U.S. consumer prices increased in February amid sticky rental housing costs, but were largely in line with expectations.
Economists are now divided on whether rising inflation will be enough to push the Fed to hike interest rates again next week after the failure of two regional banks. "Markets are relieved to see no big shocks in the U.S. CPI, which takes a little pressure off Jerome Powell," said David Russell, vice president of market intelligence at TradeStation. "If the Fed wants to pause because of the bank failures, they can now do so without losing credibility."
Latin American assets are closely linked to commodity prices which also pared declines. Brazil's real rose 0.5%, while Colombia's peso gained 1%.
Stocks in central and south America were also higher, with the MSCI's index for Latam equities up 0.4%.
Sao Paulo stocks added 0.7%, but cosmetic maker Natura & Co plunged nearly 16% as it reported a fourth-quarter net loss and lower revenues across all its business lines on Monday.
Spreads of emerging market hard-currency sovereign bonds over safe-haven U.S. Treasuries rose to 484 basis points on Tuesday - their widest level since Nov. 22. Among other developing markets, Sri Lanka will not make side arrangements with any of its bilateral or commercial creditors to reduce the impact of debt treatment on them, President Ranil Wickremesinghe said in a letter to creditors seen by Reuters. Emerging markets in Europe will also be in focus this week as the European Central Bank gears up to deliver another hefty interest rate hike on Thursday. "We will have to wait for the global headlines, like what will happen in the U.S. and definitely what will the ECB do? Which will be the main driver for the EMEA region," said Frantisek Taborsky, EMEA FX & FI strategist at ING. Key Latin American stock indexes and currencies at 1523 GMT:
Stock indexes Latest Daily
%
change
MSCI Emerging Markets 947.74 -1.43
MSCI LatAm 2151.97 0.48
Brazil Bovespa 103565.7 0.43
5
Mexico IPC 53015.73 0.01
Chile IPSA 5323.53 -0.25
Argentina MerVal 230769.8 2.461
5
Colombia COLCAP 1171.70 1.53
Currencies Latest Daily % change Brazil real 5.2330 0.67 Mexico peso 18.6263 1.49 Chile peso 800.4 0.59 Colombia peso 4727.92 0.85 Peru sol 3.7789 0.18 Argentina peso (interbank) 202.1400 -0.14 Argentina peso (parallel) 373 1.07
(Reporting by Shreyashi Sanyal in Bengaluru Editing by Alistair Bell)
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