Emerging Markets on Edge Amid U.S.-Colombia Trade Tensions

Emerging market currencies dipped as investors tracked U.S. President Trump's tariff proposals. The U.S. and Colombia prevented a trade war, leading to a temporary tariff reprieve. The Mexican peso dropped, highlighting fiscal uncertainties. Markets face challenges in a volatile environment, with key central bank decisions looming.

On Monday, emerging market currencies faced downward pressure as investors closely observed developments on U.S. President Donald Trump's proposed tariff plans. This came as anticipation built around upcoming economic data releases and significant central bank decisions expected later in the week.

The United States and Colombia narrowly avoided a trade war over the weekend when the White House announced an agreement with Colombia to accept military aircraft carrying deported migrants. This development led the U.S. to pause draft orders that would have imposed substantial tariffs and sanctions on Colombia, America's third-largest trading partner in Latin America.

In currency trading, the U.S.-linked Mexican peso fell by 1%, erasing gains made the previous week, and marking its largest annual decline in over 16 years. Analysts attributed this to the looming threats of tariffs, domestic political uncertainties, and a firm U.S. Federal Reserve policy stance.

(With inputs from agencies.)