EMERGING MARKETS-LatAm assets pressured as surging US yields lift dollar

By Utkarsh Hathi

Oct 1 (Reuters) - Most Latin American assets came under pressure on Thursday, as surging Treasury yields propelled the dollar to its highest level in over a year, prompting investors to pull back from risk-sensitive emerging-market assets.

The 10-year US Treasury yield — a benchmark for global borrowing costs — rose to as much as 5.34%, its highest since 2002, before easing to 5.30%. A softer-than-expected August inflation reading on Wednesday did little to ease investor inflation concerns amid fears of a prolonged disruption to global energy supplies.

Brent crude prices gained 3.2% after sources said Chinese refiners suspended oil product exports for October to preserve domestic stocks, putting energy supplies under further strain.

The US dollar index rose 0.31% to its highest since mid-May 2025, denting market sentiment for riskier assets.

MSCI's index of Latin American currencies .MILA00000CUS fell 0.67%, while its stocks equivalent .MILA00000PUS declined 0.89%.

"What we're seeing in terms of positioning is a more complex and challenging environment for LatAm and particularly for FX for carry positions," said Alejandro Cuadrado, managing director, global head FX & LatAm strategy at BBVA.

In Brazil, the presidential campaign will close on Thursday ahead of the voting on Sunday. Markets will closely monitor the election outcome, which will decide whether Brazil follows the broad conservative shift in political regimes across the region.

Brazil's real weakened 0.5%, while its benchmark Ibovespa index .BVSP edged 0.1% lower, even as higher crude prices lifted energy giant Petrobras by 1.3%.

Meanwhile, Trade Minister Elias Rosa said on Wednesday that Brazil is seeking a "full tariff reduction" in talks with the US, after a meeting with US Trade Representative Jamieson Greer on the sidelines of the G20 meeting.

Mexico's peso weakened 0.9% further to its lowest since December 2025, while its stocks .MXX fell 0.7%, as miner Grupo Mexico GMEXICOB.MX slipped 1.4% tracking lower copper prices.

In Chile, economic activity unexpectedly fell 1% in August from a year earlier, reflecting weakness in its mining sector.

Chile's peso dropped 1.2% to its lowest since July 2025.

"The market has tended to use the Chilean peso as a funding currency, so short the Chilean peso because of the low level of rates," added Cuadrado.

Elsewhere, global ratings agency Moody's raised Bolivia's sovereign rating on Wednesday for the second time this year, citing a material decline in the country's credit-event risk.

The Colombian peso was among the few gainers among its peers, rising 0.2%. The central bank of Colombia raised interest rates by a quarter point on Wednesday amid persistent inflationary pressures.

Key Latin American stock indexes and currencies at 14:29 GMT