Reuters: US Dollar Report: EMERGING MARKETS-Brazil real up on retail data despite cenbank

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EMERGING MARKETS-Brazil real up on retail data despite cenbank Mar 23rd 2012, 20:29 Fri Mar 23, 2012 4:29pm EDT * Finance ministry official says real is still overvalued * China outlook to continue to influence currencies * Mexico peso gains 0.3 pct, real strengthens 0.7 pct By Caroline Stauffer RIO DE JANEIRO, March 23 (Reuters) - Brazil's real strengthened on Friday after data lent optimism to the country's growth prospects, though central bank intervention threatened to limit the currency's future gains. Retail sales in Brazil rose more than expected in January, pointing to strong domestic demand and a recovery in the business cycle this year after growth in the region's largest economy fizzled at the end of 2011. "I think investors are somewhat more at ease with the story in Brazil after seeing these figures," said IDEAGlobal Analyst Enrique Alvarez. The real closed bidding 0.66 percent stronger at 1.8088 per dollar even after the central bank launched an auction to buy U.S. dollars as part of its efforts to limit the strength of the local currency. The real has weakened about 5 percent since the central bank waded back into the spot market in early February for the first time since September. Brazil's government is committed to protecting nascent industries that are made less competitive by a strong real in what it calls a global "currency war." Finance Minister Guido Mantega said on Thursday intervention would continue despite a weaker real and the finance ministry's No. 2 official said on Friday the currency remains overvalued. "The authorities appear to have had more success in weakening the real this time around," London-based Capital Economics Economist Neil Shearing wrote in a research note to clients. He sees the real ending 2012 at 1.9 per dollar. Mexico's peso weakened as much as 0.5 percent after data from its top trading partner, the United States, showed a decline in new U.S. single-family home sales. But the region's only fully convertible currency later gained 0.29 percent to 12.7613 per dollar. "This is pretty minor data and the U.S. is generally seen as doing OK - the changing outlook is very much the China story," said Win Thin, currency strategist at Brown Brothers Harriman in New York. Latin America's currencies lost ground for much of last week after a series of disappointing reports from China cast doubt on the Asian giant's future appetite for Latin America's raw materials, possibly slowing regional growth. The Chilean peso was unable to break resistance at the 490 pesos per dollar level and closed 0.04 percent weaker on Friday to bid at 488.90. Chile's currency lost 1.35 percent last week as the price of the country's top export, copper, dropped. Mining giant BHP Billiton said last week iron ore demand in China was flattening while data on Thursday showed a decline in Chinese factory activity for the fifth month. Analysts said prospects for China, a top trading partner of many Latin American countries, would continue to be crucial to determining the currency performance in Latin America. "There's obviously a lot of anxiety related to China's demand for base minerals and industrials after the BHP Billiton statements a few days back so I think that's one of the top things to observe," said IDEAGlobal's Alvarez. Link this Share this Digg this Email Reprints

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