EMERGING MARKETS-FX lower as markets evaluate Trump's tariff talk

By Purvi Agarwal

Jan 27 (Reuters) - Most emerging market currencies were lower on Monday as investors monitored developments on U.S. President Donald Trump's proposed tariff plans, while investors awaited a slew of economic data and central bank decisions this week.

The U.S. and Colombia pulled back from the brink of a trade war on Sunday after the White House said Colombia had agreed to accept military aircraft carrying deported migrants.

That led to the U.S. government holding off on draft orders imposing tariffs and sanctions, which included a 25% tariff on imports that could go up to 50% in a week, among others, on the third-largest U.S. trading partner in Latin America.

Colombia's peso COP= was not trading in early European hours but the U.S. trade-sensitive Mexican peso MXN= fell 1% after logging its best week so far this year.

Among the most widely-traded EM assets, the Mexican peso logged its biggest annual fall in over 16 years in 2024, battered by looming threats of tariffs, a domestic presidential election and a hawkish stance by the U.S. Federal Reserve.

"Trump may have gone easy on tariffs so far; however, with Trump getting his way and Colombia caving in, it highlights how focused Trump is on using tariffs as a geopolitical threat in his second term as president," said Kathleen Brooks, research director at trading platform XTB.

MSCI's index tracking global EM currencies .MIEM00000CUS was down 0.3%.

The index notched two consecutive weeks of gains on Friday on hopes that Trump would take a softer stance on tariffs, highlighting the difficulties EM markets face in navigating an uncertain economic environment under the threat of U.S. tariffs.

"Markets will need to price in some premium for the volatility that such announcements will bring," said Mohit Kumar, chief economist, Europe, for Jefferies.

Investors will also closely watch monetary policy decisions from central banks, most notably the Federal Reserve, as well as those in Brazil, Hungary, Colombia and Chile.

The EM stocks gauge .MSCIEF was off 0.3%, after Chinese startup DeepSeek's AI Assistant overtook rival ChatGPT to become the top-rated free application available on Apple's App Store in the U.S. and pressured tech stocks globally.

Israel's tech-heavy main index .TA125 lost 2%. The shekel .IRS dipped 1% against the dollar.

Elsewhere, global ratings agency Moody's revised Kenya's outlook to "positive" from "negative" on Friday. International bonds issued in the country nudged slightly lower on the day, in line with broader market moves.

South Africa's rand ZAR= slipped 1%, ahead of a local central bank decision due later in the week.

Most emerging European currencies were subdued against the euro EUR=, while the Hungarian forint EURHUF= weakened about 0.2%.

S&P Global Ratings cut Romania's credit ratings outlook to negative on Friday, as expected.

HIGHLIGHTS:

** China Vanke bonds jump after plan to redeem early $138 mln onshore notes

** India central bank's bond purchases raise bets of February rate cut, investors say

** China's industrial profits fall 3.3% in 2024, third year in the red