EMERGING MARKETS-FX steady, stocks retreat as caution lingers ahead of Trump's tariff deadline

Emerging market currencies were mixed on Friday, while stocks headed lower as markets remained cautious about the progress of trade deals with the U.S. ahead of President Donald Trump's tariff deadline.

Trump said that his administration will begin sending letters to 10 to 12 countries on Friday, informing them of tariff rates their exports would face after the July 9 deadline expires. Only the UK, Vietnam and China have signed trade agreements with the U.S. as yet, with others scrambling to clinch one before the sweeping duties come into effect and threaten economic growth.

"Many observers assume that a tariff of at least 10% will ultimately be agreed for most trading partners... even if the final rate in the US were to be significantly higher than last year, markets seem to assume that this will not trigger a major economic crisis," said analysts at Commerzbank. "The markets seem to have abandoned the worst-case scenario and are assuming that the economy will ultimately weather Trump's tariff policy."

Moreover, some concerns over the fiscal health of the U.S. remained as the Congress passed Trump's tax-cut and spending package on Thursday. It is estimated to add over $3 trillion to the U.S. fiscal debt. The dollar index was flat on the day, still trading around multi-year lows.

Trading was expected to be thin as markets in the U.S. were closed for the 4th of July holiday. MSCI's index tracking global emerging market currencies was 0.2% lower, but was looking at its fifth weekly gain.

Emerging European currencies were subdued against the euro, but the Polish zloty fell 0.2%. A report said that central banker Ludwik Kotecki sees room for two 25 basis point interest rate cuts this year, after the bank delivered a surprise trim of the same magnitude earlier this week.

The Czech crown was slightly higher, after a flash estimate put annual inflation in June in-line with expectations and retail sales continued to show solid growth. Turkey's lira was little changed against the dollar, and so were its stocks. The stocks index was set for its biggest weekly gain since March.

South Africa's rand edged 0.3% lower, while its stocks were flat. Bourses in emerging European economies were also lower, with ones in Poland and Hungary down 1.2% and 0.4% respectively.

Poland's blue chip index was set for a fourth week of gains. MSCI's gauge of global EM stocks was down 0.6%, but was set to log marginal gains this week.

Investors took on more riskier assets this week in a bid to diversify away from U.S. amid mounting fiscal worries, and after strong jobs data on Thursday bolstered risk appetite globally. HIGHLIGHTS:

** Philippine annual inflation quickens slightly, but no bar to more rate cuts ** India central bank's operations to keep overnight rates within policy corridor, analysts say

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