Most Latin American currencies and stocks declined on Wednesday as investors assessed policy cues from the U.S. Federal Reserve, signaling an interest rate hike this year, alongside details of an interim truce between the U.S. and Iran.

The U.S. central bank held interest rates steady but policymakers expect a hike in borrowing costs later this year, with markets adjusting to the change in communication under new Chair Kevin Warsh.

"Warsh may have reshaped the optics - dropping the dot and cutting the statement - but the substance of this FOMC is hawkish," said Seema Shah, chief global Strategist, Principal Asset Management.

"With half the 18 dots signaling a hike this year, alongside higher inflation forecasts, the Fed may be just a few strong inflation and jobs releases away from tightening."

The dollar index jumped to an over two-month high following the decision, pressuring LatAm currencies. The MSCI index tracking these currencies dipped 0.6%, while the stocks counterpart lost 0.9%.

Meanwhile, U.S. President Donald Trump defended his agreement with Iran, saying it had averted a global economic catastrophe, while warning he could launch fresh attacks if Tehran failed to honor its commitments.

The comments added to uncertainty for investors and sent oil prices a touch higher on the day.

Mexico's peso was the biggest loser, down 1.2% and on track for its biggest one-day drop in over a week.

Brazil's real depreciated 0.6% ahead of the central bank's monetary policy decision, where it is expected to deliver a third straight 25-basis-point cut as policymakers contend with persistent inflation pressures while gradually lowering borrowing costs from near two-decade highs.

The government said it would end subsidies for diesel and gasoline if crude oil prices stabilized around $80 per barrel.

Local stocks slipped 0.8%, with miner Vale's 2.4% drag among the biggest.

Chile's peso was down 0.6%, set to snap a six-session streak of gains - its longest since late January. Equities declined 0.8% a day after the central bank held its benchmark interest rate at 4.5% for a fourth consecutive meeting, as inflation slowed slightly within the bank's target range.

However, the central bank lowered its 2026 economic growth forecast on Wednesday to between 1.0% and 1.75% from between 1.5% and 2.5% projected in March.

Argentina's stocks climbed 0.8%, an outlier. On Tuesday, the World Bank Group said it had approved a guarantee-backed financing package to help mobilize up to $2 billion in commercial loans for Argentina, aiming to lower financing costs and strengthen public debt management.

Separately, an Inter-American Development Bank report showed China was the fastest-growing buyer of Latin American and Caribbean goods in the first quarter of 2026, though the U.S. remained the region's top market.

Latin American countries have been seeking to diversify export destinations as Trump has challenged established trade ties with the region and threatened higher tariffs.

Key Latin American stock indexes and currencies:

Latin American market

prices from Reuters

MSCI Emerging Markets 1774.75 -0.03

MSCI LatAm 2977.79 -0.90

Brazil Bovespa 168374.38 -0.75

Mexico IPC 68654.93 0.03

Chile IPSA 10813.72 -0.82

Argentina Merval 3313651 1.81

Colombia COLCAP 2376.37 0.07

Brazil real 5.1172 -0.55

Mexico peso 17.383 -1.16

Chile peso 890.9 -0.57

Colombia peso 3456.5 -0.97

Peru sol 3.3767 0.82

Argentina peso (interbank) 1441 -0.35

Argentina peso (parallel) 1455 -0.34

(Reporting by Ragini Mathur, Avinash P and Purvi Agarwal in Bengaluru; Editing by Aurora Ellis and Anil D'Silva)

Copyright Reuters or USA Today Network via Reuters Connect.

This story was originally published June 17, 2026 at 4:25 PM.

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