EMERGING MARKETS-LatAm FX slides as Trump's Greenland gambit rattles global investors

By Ragini Mathur and Twesha Dikshit

Jan 20 (Reuters) - Most Latin American currencies edged lower on Tuesday as U.S. President Donald Trump's threats to reignite a trade war with Europe over Greenland sent ripples through global markets.

Trump doubled down on his ambitions for the Arctic island, saying there was "no going back" on his goal to control Greenland while refusing to rule out military force.

The U.S. president warned on Saturday he would impose an additional 10% levy from February 1 on goods imported from eight European nations, rising to 25% on June 1 if there was no deal on Greenland.

European Union leaders were preparing to respond, with an emergency summit scheduled for Thursday in Brussels to discuss retaliatory measures.

"Renewed tariff uncertainty from the Trump administration has undermined confidence and given risk sentiment a battering," said David Morrison, senior market analyst at Trade Nation.

The escalating tensions have revived the "Sell America" trade that first emerged after Trump's "Liberation Day" levies announced last April, sending the U.S. dollar into a second day of declines.

Across Latin America, MSCI's regional currencies index .MILA00000CUS slipped 0.2%, while the equities gauge .MILA00000PUS was down 0.1%.

Mexico's peso MXN= declined 0.4% and its benchmark stock index .MXX fell 0.7%.

Colombia's peso COP= dropped 0.6% and its shares .COLCAP were up 0.1%.

Similarly, the Chilean peso CLP= was little changed and the country's stocks .SPIPSA were down 0.7%.

Brazil's stocks .BVSP bucked the trend to rise 0.4%, while its currency BRL= edged 0.1% lower.

Peru's stock index .MXNUAMPESCPGPE was a bright spot, rising 1.2% and leading gains in the region.

Analysts at Morgan Stanley said that, despite the near-term volatility, "policy shifts, changing geopolitics, and peak interest rates are increasingly likely to drive Latam toward a new investment cycle", a bull case "driven by investment rather than consumption".

BOND MARKETS UNDER PRESSURE

The turmoil extended into fixed income markets, where U.S. long-dated Treasuries sold off sharply and the yield curve steepened. Investors were digesting both Trump's tariff threats and upheaval in the Japanese bond market.

With U.S. markets closed on Monday for a holiday, Tuesday marked the first opportunity for traders to react to the weekend developments.

Emerging market bonds also took a beating. Ukraine's sovereign bonds posted their worst day of the year so far, while South African and Indonesian sovereign debt saw their steepest declines since July.

Key Latin American stock indexes and currencies at 15:08 GMT