EMERGING MARKETS-Latam FX, stocks dip as markets brace for Trump's second term

Updates to mid-session trading

By Purvi Agarwal and Pranav Kashyap

Jan 16 (Reuters) - An index tracking Latin American emerging market currencies dipped on Thursday, with the Mexican peso spearheading declines due to investors' anticipation and caution as they prepare for the potential implications of Donald Trump's second term as U.S. president.

MSCI's index tracking Latin American currencies .MILA00000CUS was 0.7% lower, while a measure of stocks .MILA00000PUS was down 1.69%. Both indexes were on track to snap a three-session winning streak.

Colombian President Gustavo Petro, late on Wednesday named two new members to the central bank's seven-member board - economists Laura Moisa and Cesar Giraldo.

Goldman Sachs analysts said, "according to local news, they will replace Roberto Steiner and Jaime Jaramillo-Vallejo" who were perceived as "the most hawkish members."

The central bank meets at the end January to take a call on interest rates.

The Colombian peso COP= fell 1%, poised for its worst day since November.

The Mexican peso MXN= weakened 1.87% against the dollar, set for its worst day in over two months.

The dollar index =USD reclaimed lost ground and once again exerting pressure on emerging market currencies.

This shift came after a softer U.S. core inflation report on Wednesday sparked speculation about the possibility of more than one rate cut by the Federal Reserve in 2025.

As the world's largest economy grapples with this uncertainty over potential rate cuts, emerging markets are also preparing for the impact of Donald Trump's anticipated tariff policies.

With Trump's inauguration set for Jan. 20, the EM landscape is on high alert, anticipating the signing of key formal documents and bills that could shape future economic dynamics for the region.

Analysts expect Mexico to be among the worst hit economies, despite some saying the country could avoid Trump's day one tariffs owing to Mexican President Claudia Sheinbaum's intensified immigration and tariff policies.

"Latin America is going to be under some pressure, particularly if we go into a much more heightened period of trade tensions... in Mexico's case, it's how it responds to what will be an aggressive set of tariffs from Trump," said Marc Ostwald, chief economist and global strategist at ADM Investor Services.

Brazil's real BRL= slid 0.8%, while its Bovespa stock index .BVSP was down 1.46%.

Data showed Brazil's economic activity exceeded expectations in November, despite the central bank's ongoing monetary tightening cycle.

The World Bank warned that U.S. across-the-board tariffs of 10% could reduce already lackluster global economic growth of 2.7% in 2025 by 0.3 percentage point if America's trading partners retaliate with tariffs of their own.

Argentina's central bank passed regulations to promote currency competition, including allowing dollar-denominated commercial payments in the local market.

The Argentine peso ARS= lost 0.8% and its Merval index .MERV off 2.64%.

MSCI's COLCAP .COLCAP lost 0.3%, while S&P's IPSA index .SPIPSA gained 0.8%. Mexican stocks .MXX slipped 0.48%.

Meanwhile, credit ratings agency Fitch said the ceasefire deal between Israel and Hamas should be positive for Israel's rating.

Its five-year credit default swaps - measuring the cost of insuring exposure to the country's bonds - narrowed slightly to 97 basis points from 98 basis points, according to S&P Global Market Intelligence data.

Key Latin American stock indexes and currencies:

(Reporting by Purvi Agarwal, Lisa Mattackal and Pranav Kashyap in Bengaluru. Editing by Jane Merriman and Alistair Bell)

((Purvi.Agarwal@thomsonreuters.com;))