EMERGING MARKETS-LatAm FX gains ground after US top court rejects Trump's tariffs

By Purvi Agarwal

Feb 20 (Reuters) - Most Latin American currencies gained against the dollar on Friday after the U.S. Supreme Court ruled against President Donald Trump's tariffs, while gains were capped by looming geopolitical tensions.

MSCI's index tracking currencies in the region .MILA00000CUS jumped 0.4%, while the stocks equivalent .MILA00000PUS gained 0.6%.

If gains hold, the week would mark the longest winning streaks for the indexes since 2010 and 2017 respectively.

In Friday's ruling, the U.S. top court struck down Trump's sweeping tariffs that he pursued under a law meant for use in national emergencies, rejecting one of his most contentious assertions of authority in a ruling with major implications for the global economy.

"The question is, are these tariffs really off the table or does the administration try to rebuild tariffs through other means, through sectoral tariffs, or whatever other sort of emergency kind of tariff routes," said Chris Turner, global head of research at ING.

"The market adjustment may be tentative to start with, to see whether this kind of court ruling sticks."

MEXICAN, BRAZILIAN CURRENCIES RALLY

Currencies in Mexico MXN= and Brazil BRL=, which have some of the highest tariffs imposed on their exports, jumped 0.5% and 0.4% respectively.

Turner said investors will be wary about repricing the Mexican peso higher as the free trade agreement between the U.S., Mexico and Canada (USMCA) is due to be renegotiated later this year.

Stocks in Mexico .MXX were up 0.1%, while Brazilian shares .BVSP were down 0.2%.

Following the U.S. ruling, Colombia's peso COP= turned positive, up 0.1%, while stocks .COLCAP were flat.

Chile's peso CLP= was the only outlier, down 0.2% but paring some early declines. Stocks in the world's largest copper exporter .SPIPSA were 0.4% higher.

Most emerging market assets were muted through the week as major Asian markets such as mainland China, and Brazil in Latin America, were shut for holidays and as geopolitical tensions dented investor appetite for riskier assets.

US-IRAN TENSIONS IN FOCUS

With U.S.-Iran tensions at the forefront in financial markets, Trump said on Friday he was considering a limited military strike on Iran.

A day earlier, Trump set a deadline of 10 to 15 days for Iran to make a deal over its nuclear programme. Tehran threatened to retaliate against U.S. bases in the region if attacked.

If Iran were to attack Israel in retaliation for any U.S. military action, analysts at Barclays said they expected the impact on Israeli financial markets to be short-lived.

However, in the scenario of a prolonged conflict, potential destruction on the ground, heightened market volatility and supply-side constraints could impact the Israeli market.

Peace talks between Russia and Ukraine also ended abruptly this week with no breakthrough, dimming hopes of an end to the four-year-old war.

Still, data from Morgan Stanley showed overall inflows in EM hard-currency funds this week stood at $1.5 billion, compared with outflows of $394 million in the previous week.

The biggest change came in hard-currency ETFs, which saw flows of $594 million, versus outflows of $123 million last week.

Elsewhere, Tullow Oil TLW.L announced a broad capital revamp and a series of deals to deepen its presence in West Africa, sending the company's bond USG91237AB6=1M up over 9.5 cents, in one of its biggest one-day jumps.

Investors also assessed an inflation report in the U.S. that showed underlying inflation increased more than expected in December, but did not materially impact bets on Federal Reserve interest rate cuts.

Key Latin American stock indexes and currencies: