EMERGING MARKETS-Mexican peso falls after Trump's return, Latam FX steady

By Purvi Agarwal

Jan 21 (Reuters) - Most Latin American currencies edged lower on Tuesday, led by the Mexican peso, a day after U.S. President Donald Trump assumed office and signed off on a slew of policy changes.

The peso MXN=, among the most widely-traded EM currencies, gave back much of Monday's 1.5% gains against the dollar after Trump set a Feb. 1 date for imposing his announced 25% tariffs for imports from Mexico and Canada if his requests for border security are not met.

The Mexican currency was last down 1% against the dollar, having lost over 20% in the last year, weighed by tariff threats and a local presidential election that added to the volatility.

President Claudia Sheinbaum emphasized that she will defend her nation's sovereignty and independence but also pursue dialogue with the U.S. The government also published a decree in its official gazette that aims to boost the relocation of businesses to the country while offering tax benefits.

Some analysts had believed that Trump's tariffs would not be as stringent as previously thought, given Sheinbaum's intense policies on immigration and tariffs on China, in a show of support to Trump.

"Sheinbaum's mix of new policies and hard ball comments is helping keep the MXN a bit in check for now, but we'll see how long that can sustain. The market still more or less betting that Trump will ultimately acquiesce on tariffs," said Brad Bechtel, global head of FX at Jefferies.

"If tariffs do actually get implemented, I would expect the (peso) to weaken pretty quickly, perhaps beyond 22.00 if tariffs are sustained for long."

Among other regional currencies, the Brazilian real BRL= was little changed on Tuesday after gaining 0.6% in the previous session.

Brazil's currency hovers near all-time lows amid market worries over government spending as well as currency outflows, with the central bank intervening in the forex market multiple times since December.

Chile's peso CLP= and the Colombian peso COP= were also trending lower.

Outside Latin America, Ukraine's government bonds rallied more than 1 cent on the dollar and its GDP warrant gained 1.5 cents in the first trading day after Trump's inauguration.

Trump's promises of a peace deal between Ukraine and Russia have boosted those bonds, which have gained more than 10 cents since October, before his re-election.

All eyes are on the materialization of potential policies that Trump had pledged during his campaign, and have kept risky EM assets under pressure, especially in the last quarter of 2024, where the U.S. Federal Reserve's hawkish stance also added to concerns.

MSCI's gauge of Latin American EM currencies .MILA00000CUS was up less than 0.1%, while the regional stocks gauge .MILA00000PUS gained 0.1%.

Highlights:

Brazil central bank announces rollover of $14 billion in swaps maturing in March

Trump vows to take back Panama Canal, talks of 'Manifest Destiny' in space

Argentina marks record trade surplus at nearly $19 bln in Milei's first year as president

Key Latin American stock indexes and currencies at 1534 GMT:

(Reporting by Purvi Agarwal and Shashwat Chauhan in Bengaluru; Editing by Susan Fenton)

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