EMERGING MARKETS-Latam assets head for weekly losses as rising oil, Treasury yields weigh

By Utkarsh Hathi and Purvi Agarwal

Sept 25 (Reuters) - Most Latin American assets were on track for weekly losses on Friday as elevated Treasury yields and prospects of more US Federal Reserve rate hikes weighed on markets, while investors digested Brazil's inflation figures.

Oil prices eased 1.2% as traders assessed prospects of talks resuming between the US and Iran after a report said the countries were exploring a phased path to reopen the Strait of Hormuz and lift Washington's economic blockade of Tehran. O/R

Crude prices trading close to $105 per barrel, fears of persistent price pressures and a resilient US economy pushed 30 year Treasury yields back to multi-decade highs. Coupled with rising bets on further Fed rate hikes, the dollar index touched a nearly two-month high this week.

"We are entering a more adverse regime for EM (emerging markets). Heightened supply-side inflation shocks alongside a more hawkish Fed will likely put net commodity importing EM (without AI-related offsets) under pressures," said analysts at Citigroup.

"Other EM, including CEE, India, the Philippines, Turkey, Africa and Latam, are not materially part of this AI tailwind."

MSCI's index tracking Latin American equities .MILA00000PUS was little changed, while its currency equivalent .MILA00000CUS slipped 0.1%. Both indexes were set for weekly losses of over 1% each.

Equities in the region have lagged behind the broader emerging market stocks .MSCIEF, reflecting their limited exposure to AI-linked stocks. Global equity funds attracted the most inflows since early July in the week to September 25 on AI optimism, LSEG Lipper data showed.

However, most assets staged a recovery on Friday. Colombia's peso was the biggest gainer among peers with a 1.4% rise, rebounding after nine consecutive sessions of declines, its longest losing streak since July 2022.

Most other currencies also edged higher.

BRAZIL INFLATION EXCEEDS FORECASTS

Consumer prices in Brazil for the month through mid-September accelerated more than expected, data showed on Friday. Annual inflation in the period reached 4.47%, above the 4.3% anticipated by economists polled by Reuters.

Brazil's central bank delivered a fifth consecutive rate cut last week and projected inflation close to its 3% target at the policy horizon for its next rates decision.

"We continue to expect Copom to proceed cautiously with further easing. The firmer underlying readings strengthen the case for maintaining a gradual pace," said Andres Abadia, chief LatAm economist, Pantheon Macroeconomics.

The data comes into focus ahead of the country's presidential election, with voting to take place on October 4. President Luiz Inacio Lula da Silva is maintaining a thin lead over Senator Flavio Bolsonaro, Datafolha poll showed on Friday.

The real strengthened 0.1%, while the benchmark stock index Ibovespa .BVSP fell 0.2%.

Elsewhere, the Mexican peso reversed declines to gain 0.1% and was heading for its biggest weekly fall since March. Stocks in Mexico .MXX gained 0.9%.

Equities in Argentina .MERV lost 1.7%, while Colombia stocks .COLCAP were down 0.7%.

Key Latin American stock indexes and currencies at 1950 GMT: