EMERGING MARKETS-Mexican peso leaps on news Trump won't impose tariffs immediately

By Shashwat Chauhan

Jan 20 (Reuters) - Mexico's peso was on course for its best day since August and emerging market stocks climbed into positive territory for the year on Monday, after a report that Donald Trump will not impose blanket trade tariffs on his first day back as U.S. president.

Trump will be sworn in at 1700 GMT. He is widely expected to quickly sign a flurry of executive orders concerning immigration, energy and trade tariffs.

However, an incoming official said Trump would issue a broad trade memo later but stop short of formally imposing new tariffs right away in order to give federal U.S. agencies time to evaluate trade relationships with China, Canada and Mexico,

Mexico's peso MXN=, which has fallen nearly 20% over the last year amid the speculation around tariffs, jumped 1.5% on the day to cut its losses since November's Trump election win to just over 2%.

Back then, Trump had stated that immediately after his inauguration, he would sign "all necessary documents" to begin charging Mexico and Canada 25% tariffs.

A presidential election in Mexico last year also added to volatility in one of the most widely traded currency and bond markets in both Latin America and emerging markets generally.

Implied volatility options to buy or sell Mexican pesos overnight MXNONO=FN were trading at 30 vols, their highest since the Nov. 5 U.S. elections.

One-week implied volatility MXNSWO=FN dropped back a touch to just over 17 vols. It had stood at nearly 45 in early November.

MSCI's main emerging market stocks index, which tracks 24 countries, also rose 1.3% to lift itself back into positive territory for the year.

Monday's early fireworks, though, came in Mozambique where its sole international market bond XS2051203862=TE tumbled almost 2.5 cents on the dollar after Bloomberg reported that the new government was considering a debt restructuring.

That follows weeks of deadly protests following a hotly contested presidential election in October.

There was focus too on the Middle East after Hamas released three Israeli hostages in Gaza and Israel freed 90 Palestinian prisoners on Sunday, the first day of a ceasefire suspending their 15-month war.

The Israeli shekel ILS= was last down 0.1% following its near 1.5% jump on Friday. Hard currency debt of both Israel and Lebanon was largely flat on the day while MSCI's Israeli stocks index maintained the 58% surge it has made since the Hamas Oct. 7 2023 attacks.

Back in Latam, Brazil's real BRL= was up 0.6% after its central bank sold a total of $2 billion in two separate dollar auctions with repurchase agreement, its first foreign exchange intervention this year.

The central bank intervened multiple times in the currency market back in December, totaling more than $30 billion as the real sank to record lows amid market worries over government spending as well as currency outflows.

Brazil's Congress on Dec. 20 approved a government-proposed fiscal package that includes measures to contain spending.

"The prospect of higher profitability for US companies attracts foreign capital to the country's stock markets, further contributing to the global strengthening of the US dollar," StoneX analysts noted.

Chile's peso CLP=, one of the less liquid currencies in Latin America, also appreciated 0.8% against the dollar in light volumes.

MSCI's index for Latin American currencies .MILA00000CUS was up 0.5% on the day, about 1% from its November highs.

A gauge for stocks .MILA00000PUS added 0.7%, with Argentina's Merval index .MERV advancing 1.1%.

Trading volumes are expected to be light as U.S. markets were shut for the Martin Luther King Jr. Day holiday.

HIGHLIGHTS

** Trump to declare national emergency at the border, Trump official says

** Mexican cenbanker Heath sees inflation dipping below 4% in January

** Brazil's Lula hopes for 'fruitful' Trump government

Key Latin American stock indexes and currencies:

(Reporting by Shashwat Chauhan in Bengaluru, editing by Ed Osmond)

((Shashwat.Chauhan@thomsonreuters.com;))