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Mexican peso drops after Trump mulls tariffs from Feb

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Argentina posts record trade surplus for 2024

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MSCI Latam FX flat, stocks up 0.2%

(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, 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 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, 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 and the Colombian peso 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

flat, while the regional stocks gauge 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:

Equities

Latest Daily % change

MSCI Emerging Markets 1082.31 0.17

MSCI LatAm 1935.29 0.21

Brazil Bovespa 123149.4 0.24

Mexico IPC 50348.73 0.29

Chile IPSA 7038.29 0.4

Argentina MerVal 2588083.75 2.02

Colombia COLCAP 1388.95 0.1

Currencies Latest Daily % change

Brazil real 6.0323 -0.01

Mexico peso 20.6526 -0.87

Chile peso 1001.4 -0.19

Colombia peso 4302.5 -0.04

Peru sol 3.7275 0.16

Argentina peso 1,046.0 0.00

(interbank)

Argentina peso (parallel) 1,215.0 2.02