Most Latin American currencies weakened on Monday, with Brazil's real hitting near six-month lows as a dollar rally added to risk aversion spurred by worries about a global energy crunch.
Oil and coal shortages have hit several major economies in recent weeks, with factory shutdowns in China being especially concerning for Latin America, given the region's heavy dependence on the country.
Concerns over debt defaults in China's property sector also weighed, with Chinese local and dollar-denominated bonds slumping on the prospect of missed payments by China Evergrande and its peers.
The dollar rallied on rising bets that the US Federal Reserve will announce a tapering of its massive bond-buying next month despite softer US payrolls.
Crude exporter Mexico's peso fell 0.5% even as oil prices hit multi-year highs. Waning risk appetite has made the peso less attractive as a destination for carry trade.
Latam FX dips as high treasury yields, Chinese concerns weigh
"The market continues to price in more (central bank) hikes over the next 12 months than our economists think will be delivered, leaving MXN vulnerable to a potential dovish front end repricing," strategists at JPMorgan said in a note.
High inflation prints last week, coupled with rising oil prices and laggard energy supplies, have fed concerns that inflation will stay elevated for longer and potentially weigh on an economic recovery despite central bank efforts to mitigate its impact.
Still, some analysts said concerns over an energy-led inflation spike were overplayed and that prices would stabilize eventually.
"Overall we expect only a modest impact on growth and inflation from the current increase in energy prices," Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note.
Brazil's real fell 0.2%. A central bank market survey showed a rise in interest rate projections for 2022, to 8.75% from 8.5%, amid rising inflation forecasts.
Brazil's benchmark rate currently stands at 6.25%, and the central bank has hinted at more hikes this year.
The real has fallen around 12% from its highs this year, despite five interest rate hikes by the central bank to rein in inflation. Political uncertainty ahead of general elections next year has been one of the main sources of risk in Latam's largest economy.
While most Latin American stocks tracked gains in their broader emerging market peers, Brazil's Bovespa broke a four-day winning steak, down 0.4%, as bank stocks fell.
Chilean and Argentine markets were closed for a holiday.