EMERGING MARKETS-LatAm stocks, FX slide as stalled Iran progress lifts oil, yields and dollar

By Utkarsh Hathi and Purvi Agarwal

Sept 23 (Reuters) - Most Latin American assets tumbled over 1% on Wednesday as the US dollar rallied to a near two-month high on expectations the Federal Reserve will raise interest rates further, following sharp jumps in oil prices and government bond yields.

The dollar index rose 0.6% to its highest level since July 29, buoyed by the Fed's interest rate hike last week and signals that more increases could follow.

"The Fed seems to have a unanimous consensus that moving forward, the best thing to do is to hike rates again. That alone is what's really pushing the dollar higher against everyone else," said Juan Perez, director of trading at Monex.

Iran and the US remain far apart on how to end their war but diplomacy must continue, according to a senior Iranian official, after Iran's president told the UN General Assembly that Tehran would never surrender to US pressure.

The lack of progress towards ending the conflict pushed up oil prices over the crucial $100 a barrel level after five sessions of declines. O/R

Yields on global government bonds surged, with the one on the benchmark US 10-year Treasury last at 5.108%, its highest since 2007. US/

Latin American assets were also swept up in the global selloff, with MSCI's index tracking regional currencies .MILA00000CUS down 1.1% and the stocks equivalent .MILA00000PUS off 1.8%.

Colombia's peso slid 2.3% to its lowest level in over two months, set to mark its steepest daily decline in over a month.

While the currency has been the best performer among its peers since the start of 2025, investors fear a hawkish Fed could weigh heavily given Colombia's focus on economic recovery and need for spending following a recent earthquake.

"If indeed the Fed accelerates the pace of hiking, that's eventually going to hurt the Colombian peso in a big way, because based on the earthquake and needing to spend money in economic recovery, they don't want to raise rates a whole lot," added Perez.

Analysts at BofA Global Research said Colombia's new administration has the right diagnosis of the country's fiscal challenges, after recently upgrading their rating on its external debt.

Currencies in Chile , Brazil and Mexico all weakened over 1% against the dollar. The real and the Mexican peso were set for their steepest daily falls in months.

Equities in the region fared slightly better. Brazil's Ibovespa .BVSP lost 1.2%, with declines contained by a 2.5% gain in energy giant Petrobras . Traders remain cautious on Brazilian assets given the uncertainty around next month's presidential election.

Brazil's central bank monetary policy director Nilton David said monetary policy has been producing the intended effects and that smooth, predictable rate moves were the best response to current uncertainty.

Stocks in Mexico .MXX were down 0.2%. Argentinian stocks .MERV lost 1%. The Colombian benchmark .COLCAP gained 0.8%, supported by a 1.3% rise in Ecopetrol ECOPETROL.CN.

Elsewhere, Chinese President Xi Jinping was due in Washington on Wednesday ahead of bilateral talks with Trump on Thursday.

The US Export-Import Bank plans to finance up to $7 billion in critical minerals and energy projects in Argentina, in an attempt to deepen economic ties between the countries.

Global debt rose by more than $10 trillion in the first half of 2026 to a record above $365 trillion, driven largely by EMs, the Institute of International Finance said.

Trump and Venezuela's interim president, Delcy Rodriguez, discussed the restructuring of Venezuela's billions of dollars in sovereign debt, US Secretary of State Marco Rubio said.