EMERGING MARKETS-Latam FX, stocks hold gains as Trump sworn in; Mexican peso jumps

Updates to mid-session trading

By Shashwat Chauhan and Pranav Kashyap

Jan 20 (Reuters) - Latin American currencies were buoyant on Monday, with Mexico's peso poised for its best day in two weeks, following Donald Trump's inaugural speech and news that he would not impose blanket trade tariffs on U.S. trading partners on his first day as U.S. president.

Trump was sworn in as the 47th U.S. President. In his inaugural address, he said he would impose tariffs and tax countries to enrich Americans, promised an overhaul of the trade system, and said the United States would establish an "external revenue service".

Trump will issue a broad trade memo on Monday that stops short of imposing new tariffs on his first day in office but directs federal agencies to evaluate U.S. trade relationships with China, Canada and Mexico, a Trump administration official said.

"It's more or less what we were expecting. Nothing out of the blue," said Pantheon Macroeconomics' chief Latin America economist Andres Abadia, referring to Trump's inauguration.

"Volatility will be more elevated this week as markets are going to be closely watching what Trump will do. Therefore, it's too soon to say if this rebound is going to be sustained."

Mexico's peso MXN=, which had depreciated nearly 20% over the past year due to tariff concerns, gained 1.32% on the day, narrowing its losses since Trump's election victory in November to just over 2%.

Previously, Trump had declared his intention to sign the necessary documents to impose 25% tariffs on Mexico and Canada immediately after his inauguration.

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.

The price of Mexico's benchmark bond MX10YT=RR rose by 0.3%.

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.

The U.S. dollar =USD dipped 1%, providing a tailwind for emerging market currencies.

MSCI's main emerging market stocks index .MSCIEF, which tracks 24 countries, also rose 1.18% 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 after 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= climbed 0.44%, boosted by the central bank's intervention. The bank conducted two separate dollar auctions, totaling $2 billion, marking its first foray into foreign exchange intervention this year.

In December, the central bank intervened multiple times, injecting over $30 billion to stabilize the real amid market concerns over government spending and currency outflows.

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

Markets are also anticipating a series of economic data releases from the region's countries throughout the week, which will provide insights into the economic landscape.

Chile's peso CLP=, one of the less liquid currencies in Latin America, appreciated 0.57% against the dollar in light volumes.

MSCI's index for Latin American currencies .MILA00000CUS was up 0.28% on the day.

A gauge for stocks .MILA00000PUS added 0.57%, with Argentina's Merval index .MERV advancing 1.25%.

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 illegal immigration a national emergency in border crackdown

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

** Trump says U.S. will take back Panama Canal

Key Latin American stock indexes and currencies:

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Ed Osmond and Nia Williams)

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