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Mexican peso falls after Trump considers tariffs from Feb

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Ukraine international bonds rally

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MSCI EM FX set for sixth session of gains

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MSCI EM FX up 0.2%, stocks flat

By Purvi Agarwal

Jan 21 (Reuters) - Most emerging market currencies

weakened against the dollar on Tuesday, with Mexico's peso

leading losses, after U.S. President Donald Trump took office

and announced a barrage of policy changes and threatened tariffs

against Mexico and Canada.

However, there were also some bright spots, with Ukraine's

sovereign dollar bonds rallying in the first trading session

following Trump's inauguration.

The dollar had languished on Monday after an incoming

official said Trump would stop short of formally imposing new

tariffs immediately.

But after swearing in, Trump said he was considering tariffs

on Canada and Mexico by Feb. 1 and declared illegal immigration

a national emergency.

Mexico's peso, one of the most widely-traded emerging

market currencies, fell 1.48% by 1023 GMT, while the Canadian

dollar dropped 0.83%.

The peso, at 20.79, has lost some 20% of its value over the

last year, and is not far from its weakest levels since July

2022.

"At some point in 2025, a mixture of expectations of tariffs

combined with weak confidence is going to really weigh on the

Mexican economy," said Kathleen Brooks, research director at

trading platform XTB.

"The FX market is getting a double whammy because it's in

the firing line for tariffs and we've got a very strong dollar."

Ukraine's international dollar bonds rallied after the

inauguration, with the 2029 maturity adding

1.3 cents to bid at 69.49 cents on the dollar, according to

Tradeweb data.

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.

Elsewhere, China's onshore yuan closed at its

strongest since early December at 7.27 per dollar.

The Indian rupee was flat while the Malaysian

ringgit rose 0.4%.

The dollar index - which measures the greenback

against a basket of global currencies - was up 0.7% after

tumbling more than 1% in the last session.

South Africa's rand eased 0.8%, in line with the

dollar's rise, and currencies in emerging Europe followed suit.

Meanwhile, among emerging European currencies, Poland's

zloty and the Hungarian forint each lost

about 0.2% against the euro.

MSCI's index tracking global EM currencies

was up 0.2%, set for its sixth straight day of gains. The stocks

gauge was flat.

Israel's shekel lost 0.4% against the greenback.

Trump expressed skepticism about the Gaza ceasefire deal on

Monday, when asked if he was confident that all three phases of

the agreement would be implemented.

Israeli hard currency bonds, stocks and the shekel had

rallied last week after the complex accord. Moody's Ratings said

the deal reduces the risks to Israel's public finances and could

improve its sovereign credit rating.

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 Federal Reserve's hawkish stance also added to

concerns.

Meanwhile, the IMF said that front-loading some planned

budget cuts to 2025 would create room for faster interest rate

cuts in Poland, where monetary policy remained tight after the

central bank left rates unchanged last week.

Investors will also parse through comments from South

African, Israeli and Ukrainian leaders at the World Economic

Forum gathering in Davos.

HIGHLIGHTS:

** Fitch Downgrades China Vanke to 'B-' w/ Rating Watch

Negative

** South Korea economy barely grew in Q4; BOK to cut rates

in February: poll