Most Latin American currencies rallied on Tuesday as the dollar weakened, while stocks in the region fell sharply on fresh doubts of how effective COVID-19 vaccines are against the Omicron variant. Currencies of Mexico , Colombia and Chile firmed between 1% and 1.9% as the dollar gave back gains made after hawkish comments from Federal Reserve chair Jerome Powell. Powell said inflation no longer seemed transitory and said bond purchases may be tapered sooner. "Right now there were some expectations that we'd hear a more dovish Federal Reserve, but we're not, we're hearing a more hawkish Fed, but not that hawkish to the extent that people are betting that they'll raise rates sooner next year," said Art Hogan, chief market strategist at National Securities. Mexico's peso looked to post its best session in five months, while Colombia's peso snapped a six-day losing streak and pulled away from 19-month lows. But on the month, Mexico peso lost about 4% as slowing economic growth and rising inflation amid fears surrounding the spread of the coronavirus weighed. Chile's state copper commission Cochilco said that it slightly raised its predicted copper price for this year to $4.23 per pound, supported by a rally in the metal this year. Meanwhile, the Colombian, Chilean and Peruvian stock exchanges have approved a merger into a regional holding company, creating Latam's second biggest bourse. The integration will increase the number of debt issuers, attract international participation, increase regional investment in pension funds and up the volume of derivatives. read more Brazil's real , fell 0.7%. Brazilian Economy Minister Paulo Guedes said on Tuesday that Brazil's gross domestic product (GDP) will not grow 4.5% or 5% in 2022 due to high inflation. Stocks in Latin America came under pressure after warnings from U.S. drugmakers Moderna (MRNA.O) and Regeneron Pharmaceuticals (REGN.O) that their COVID-19 vaccines and antibody cocktails could be less effective against the new coronavirus variant. read more "The emergence of a new, heavily mutated, COVID-19 variant has thrown markets into a tailspin. While the news flow around omicron will dominate market psychology in the very near-term, we think the bar to drive a truly nefarious outcome in risk markets and macro is very high," wrote Mazen Issa, senior FX strategist at TD Securities in a client note. Brazilian stocks (.BVSP) dropped 2.2%, while Chile's IPSA index (.SPIPSA) dropped as much as 3.5% before recovering some ground. Shares in Brazilian education holding company Anima Holding (ANIM3.SA) surged 22% after announcing a deal to sell a stake of its medical education subsidiary Inspirali to DNA Capital. Key Latin American stock indexes and currencies at 1409 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets (.MSCIEF) 1213.67 -0.44 MSCI LatAm (.MILA00000PUS) 2024.65 -0.97 Brazil Bovespa (.BVSP) 100572.31 -2.18 Mexico IPC (.MXX) 49528.11 -0.54 Chile IPSA (.SPIPSA) 4483.83 -0.48 Argentina MerVal (.MERV) 78159.96 -1.182 Colombia COLCAP (.COLCAP) 1356.35 0.66 Currencies Latest Daily % change Brazil real 5.6474 -0.65 Mexico peso 21.4270 1.13 Chile peso 829.4 1.81 Colombia peso 3992.2 0.93 Peru sol 4.056 -0.07 Argentina peso (interbank) 100.9300 0.01 Reporting by Shreyashi Sanyal in Bengaluru Editing by Alistair Bell and Nick Zieminski Our Standards: The Thomson Reuters Trust Principles.