EMERGING MARKETS-Mexican peso dips on Trump's comeback; Latam FX steady

Updates to mid-session trading

By Purvi Agarwal and Pranav Kashyap

Jan 21 (Reuters) - Most Latin American currencies were steady on Tuesday, while the Mexican peso fell, just a day after U.S. President Donald Trump stepped into office with a flurry 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 0.87% against the dollar, having lost over 20% in the last year, due to tariff threats and the turbulence of a local presidential election.

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

"Volatility in EM currencies is likely to remain elevated. The Mexican peso is not out of the woods and new lows cannot be ruled out," Societe Generale analysts said.

The U.S. dollar =USD regained some lost ground in the session, after its worst performance in over a year on Monday, creating headwinds for Latin American currencies.

The Brazilian real BRL=, however, held its ground, remaining relatively unchanged after a 0.6% rise in the previous session. Brazil's currency hovers near all-time lows, with concerns over government spending and currency outflows prompting multiple central bank interventions 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.

The anticipation of Trump's campaign promises becoming reality has kept emerging market assets under pressure, particularly in the final months of 2024. Adding to the tension, the U.S. Federal Reserve's hawkish stance has only deepened the concerns.

MSCI's gauge of Latin American EM currencies .MILA00000CUS flat, while the regional stocks gauge .MILA00000PUS gained 0.2%.

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:

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

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