The dollar weakened, following the Federal Reserve's signaling of fewer interest rate hikes over the next two years and expressing caution about the US economic outlook. Worries over global growth weighed stocks from Asia through Europe and the Americas.
Mexico's central bank hiked borrowing costs by 25 basis points to 8.25 percent, their highest in more than a decade. The bank's unanimous decision, for which it cited increased uncertainty and expectations for stubbornly high inflation, matched the market's consensus view.
The cautious outlook which followed the decision propped up the peso, which traded 1.1 percent higher after seeing a more than six-week peak during the session. Mexican stocks tacked on 0.7 percent.
"An increased focus on wages and inflation expectations keeps the risk bias tilted towards a February hike, despite the increased policy flexibility afforded by a less hawkish Fed," wrote Sacha Tihanyi, TD Securities' deputy head of emerging markets strategy, in a note.
The difference in yields on 10-year and one-year Mexican bonds turned negative for the first time in over two months on Thursday before the rate decision.
Furthermore, the difference in yields on three-year and one-year government bonds in one of the world's most liquid local-currency bond markets went deeper into negative territory.
Local Mexican economists told Reuters these moves were an indication that markets were expecting another Banco de Mexico rate hike in the near term, beyond that delivered on Thursday.
Christian Lawrence, a senior market strategist with Rabobank, wrote in a note that he expected rates to top off at 8.50 percent this cycle, implying one more hike.
"We see room for USD/MXN to test 19.80 but we expect 20-21 to dominate in 2019," he said.
Brazil's real jumped 1.4 percent but its Bovespa stocks benchmark slid half a percent, hurt by weakness in the energy and materials sectors.
State-controlled oil firm Petroleo Brasileiro SA's (Petrobras) ordinary and preferred shares slid 2.4 percent and 3.4 percent, respectively, as a dramatic slide in global oil prices exacted a heavy toll.
The Chilean peso dipped 0.1 percent while local stocks slid 1.1 percent.
Securities of Chilean lithium major Sociedad Quimica Y Minera De Chile SA tumbled about 7.6 percent after a warning on lithium prices by Australian firm Orocobre Ltd sparked weakness in the sector.
Colombia's stocks fell for a sixth straight session while its peso slid 1.6 percent. Stocks in Argentina fell 2.4 percent but the country's peso firmed about 0.8 percent against the weak dollar.