I just stumbled across a nice undocumented feature. It’s possible to use CREATE_OBJECT to create XML VARA objects. There are two ways of doing this:
1. Specify XML as the object type instead of VARA.
:SET &RC#= CREATE_OBJECT(XML,"UC0.TEMP.VARA_XML,,"My XML VARA","I","","FREE")
or
2. Add the VARA type XML as an eighth argument.
:SET &RC#= CREATE_OBJECT(VARA,"UC0.TEMP.VARA_XML,,"My XML VARA","I","","FREE",XML)
The v12.0.4 JUI reveals this optional argument in the tooltip for the function, so the option has been around for a while.

Enjoy!