Updates with late trading prices

By Pranav Kashyap and Purvi Agarwal

Feb 26 (Reuters) - Most Latin American currencies and stocks weakened, as caution around AI trade dampened global risk sentiment, while Colombian assets largely underperformed peers after Ecuador hiked tariffs on its products.

Colombian stocks .COLCAP slumped 4.7%, and were set for their steepest intraday decline since March 2020, while the local peso COP= lost 2.1% against the dollar, and was on track for its biggest one-day fall since April last year.

Ecuador will increase tariffs on Colombian imports to 50% from the current 30% from March 1, the government said in a statement on Thursday, escalating a trade spat between the neighboring countries over border security.

A 1.5% tumble in oil prices also impacted Colombian assets. Oil is among the country's top exports.

Broadly, investors were not impressed by chip giant Nvidia's NVDA.O upbeat forecasts as doubts lingered over returns from lofty investments in AI, which hit risk appetite across markets.

The trepidation reverberated in Latin America, with MSCI's index tracking stocks in the region .MILA00000PUS down 1%.

Even with Thursday's softer tone, the index eyed a positive end to the month, as cracks in the AI trade, stretched tech valuations, and uncertainty around President Donald Trump's tariff agenda prompted investors to diversify away from U.S. stocks.

William Jackson, chief EM economist at Capital Economics, said "EM external positions look strong by recent standards, suggesting that they are well placed to cope were there to be a bout of outflows."

REAL TURNS LOWER, BRAZIL ECONOMY COOLS

Brazil's real BRL= was down 0.3%, and on track for a roughly 2% monthly gain, though that would be only about half the increase of January's rally.

The currency has been under pressure as a series of datasets that point to a cooling economy have led investors to anticipate an interest rate cut in March, which could be Brazil's first since 2024.

The real has resumed its downtrend, Kenneth Broux, head of corporate research at Societe Generale, noted.

"The political dimension cannot be overlooked for the outperformance of the real."

In Latin America, the story has become less about a single EM trade and more focused on individual markets, as local data pulls central banks onto diverging paths, impacting the attractiveness of the carry trade in these markets.

Mexico's economy has shown signs of heating up after last year's sluggishness, reinforcing the central bank's decision to pause its rate-cut cycle. The Bank of Mexico still raised its growth forecast for the economy this year to 1.6% from 1.1%.

But Mexico's assets ran into a rough patch earlier in the week as investors assessed the fallout from Sunday's operation in which Mexican forces killed the country's most wanted cartel leader.

The peso MXN= was down 0.2% on Thursday, while stocks .MXX were off 0.1%.

Chile's peso CLP= and stocks .SPIPSA also fell as prices of copper eased from two-week highs.

In frontier markets, Senegal's dollar bonds firmed as the government launched its first public bond offering of the year, aiming to raise 200 billion CFA francs ($362.15 million).

Key Latin American stock indexes and currencies:

(Reporting by Pranav Kashyap in BangaloreEditing by Rod Nickel and Shinjini Ganguli)

((pranav.kashyap@tr.com; +919886482111;))