Reuters: US Dollar Report: EMERGING MARKETS-Brazil real gains on Feb industry output recovery

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EMERGING MARKETS-Brazil real gains on Feb industry output recovery Apr 3rd 2012, 16:15 Tue Apr 3, 2012 12:15pm EDT * Mexico peso weakens 0.16 percent; Brazil real gains 0.4 percent * Brazil Finance Minister says currency rate "reasonable" * Brazil central bank still calls auction to buy dollars By Caroline Stauffer SAO PAULO, April 3 (Reuters) - The real strengthened after better-than-expected Brazilian industrial production data on Tuesday while the Mexican peso weakened after U.S. factory orders slightly missed expectations. Data in Brazil showed industry output, which has restrained economic growth, rose 1.3 percent in February. Revised statistics also showed a smaller decline in January output than had initially been reported. Local industries blame a strong currency for a fall in Brazilian production over the past year and policymakers have committed to weakening the currency to protect manufacturers from cheap imports. The real strengthened 0.4 percent to bid 1.8232 per U.S. dollar after weakening for the two previous sessions. "The combination of the slightly better-than-expected number today coupled with the revision to January's data might have some impact," said Neil Shearing, Chief Emerging Markets economist at Capital Economics in London. "The authorities might step back on the currency war," he added, referring to the government's efforts to weaken the real. The real has weakened about 5.4 percent since February, when the central bank purchased dollars in the spot market for the first time since September. The bank called an auction to buy dollars on Tuesday. The government has also raised its financial transactions or "IOF" tax and on March 12 extended its scope to foreign debt maturing in up to five years. But Brazil's Finance Minister Guido Mantega said on Tuesday the current exchange rate is "reasonable" for local industries, easing concerns that policymakers may be preparing additional measures to impede the currency's gains. EYES ON FED MINUTES Chile's peso gained 0.2 percent to bid 482.15 per dollar while Mexico's peso weakened 0.16 percent to 12.74 per dollar. International markets were focused on Federal Reserve minutes from March, due later in the day, for clues on the recovery of the U.S. economy and the willingness of policymakers to provide markets with further monetary stimulus. "There is some trepidation in the run-up to Fed minutes," said Kathryn Rooney Vera, an emerging markets analyst at Bulltick Capital Markets in Miami. Mexico's currency is particularly sensitive to U.S. manufacturing data as many Mexicans work in U.S. factories and the United States buys nearly 80 percent of Mexico's exports by value. The U.S. Commerce Department said on Tuesday new orders for manufactured goods rose 1.3 percent in February, just below the 1.5 percent gain expected in a Reuters poll. January's decline was revised downward to 1.1 percent. "When you see factory orders come in less than expected with previous orders revised on the downside that leans on the peso," Rooney Vera said. "The Mexican story is so tied to the U.S." Link this Share this Digg this Email Reprints

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