EMERGING MARKETS-FX and stocks cheer Trump's softer stance on tariffs, interest rate demand

By Purvi Agarwal

Jan 24 (Reuters) - Most emerging market currencies gained on Friday, with MSCI's index putting them at an over-one-month high, after U.S. President Donald Trump took a softer approach to potential Chinese tariffs and demanded lower U.S. interest rates.

The newly inaugurated U.S. president said that he could reach a trade deal with China following "friendly" talks with Chinese President Xi Jinping.

The dollar index =USD fell 0.7%, to levels last seen in late December, as a result.

The onshore Chinese yuan CNY=CFXS jumped to its highest level in eight weeks and was up 0.6% against the dollar, logging its best week since September.

The country's main stock indexes .CSI300, .SSEC closed over 0.7% higher each, after hitting their highest levels since early January in the previous session. .SS

"This seems to feed into the growing sense that Trump is underdelivering on protectionism compared to pre-inauguration remarks, and that ultimately some of those tariff threats may not materialise as long as some concessions are made on trade," ING analysts said in a note.

"We would not be entirely surprised if Trump's next comments on the matter point in the opposite direction."

Mexico's peso MXN=, expected to be among the most vulnerable to tariffs, was up 0.6% on the day, adding to its 2.5% gain logged so far this week.

Threats of U.S. tariffs have cast a shadow over certain risky EM assets since Trump won the November presidential election, and uncertainty over their implementation kept EM currencies volatile and reactive to headlines through the week.

In his address at the World Economic Forum (WEF) in Davos on Thursday, Trump also demanded that interest rates drop immediately and that other countries should follow suit.

Prospects of higher-for-longer interest rates in the world's biggest economy had sparked a rally in the dollar and U.S. Treasury yields earlier this month, clouding the outlook for EM assets in 2025.

Over the counter data showed a 1.6% jump in the Russian rouble against the greenback. Romanian markets were closed due to a public holiday.

The Turkish lira TRYTOM=D3 continued to trade at record lows, a weakness amplified by the central bank's an expected 250 basis point cut on Thursday.

South Africa's rand ZAR= climbed 0.8% to a one-month high, while its stocks index .JTOPI was up 1.2%.

Emerging Europe currencies were mixed against the euro on the day. The Czech crown EURCZK= was little changed after data showed a dip in consumer confidence in January.

MSCI's index tracking global EM currencies .MIEM00000CUS was up 0.5%, on track for its best week since July 2023. The stocks gauge .MSCIEF was up 0.7%, with both indexes trading at an over one-month high.

HIGHLIGHTS:

** Philippines raises $3.3 bln through sale of U.S. and euro bonds

** Trump calls for $1 trillion Saudi investment, lower oil prices

** Dividend surge signals culture shift in China's markets

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For TURKISH market report, see .IS

For RUSSIAN market report, see RU/RUB