Reuters: US Dollar Report: EMERGING MARKETS-Brazil real slips on intervention

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EMERGING MARKETS-Brazil real slips on intervention Sep 12th 2012, 21:30 Tweet Share this Email Print Wed Sep 12, 2012 5:30pm EDT * Brazil central bank sells $1.37 bln in reverse currency swaps * Mexico's peso down 0.14 pct, real falls 0.5 pct By Anna Irrera RIO DE JANEIRO, Sept 12 (Reuters) - The Brazilian real weakened on Wednesday after the country's central bank intervened to halt four sessions of gains that drove the currency near an informal floor of 2 reais per dollar. The bank sold $1.37 billion in reverse currency swaps , d erivatives contracts that mimic buying dollars in the futures markets, as part of its efforts to curb the real's gains. Latin American currencies have been spurred to multi-month highs against the dollar in recent sessions, helped by expectations that the European Central Bank and the U.S. Federal Reserve would deploy more monetary stimulus. Monetary easing in major economies tends to push down interest rates in those countries and boost the appeal of higher yielding emerging market assets to foreign investors. Brazil's central bank has been one of the most aggressive banks in trying to fight the currency appreciation caused by such foreign flows as it seeks to support local manufacturers, who face cheaper imports when the real gains. "The bank is showing through its auction what we already knew, which is that we no longer have a floating currency," said Joao Medeiros, a partner at Pioneer Corretora de Cambio Ltda, a brokerage firm in Sao Paulo. "The market is managed by the central bank." The real slipped 0.5 percent to bid at 2.0255 per dollar at the local market close. Since early June the government has used intervention to keep the real locked within the range of 2.0-2.1 per dollar, a level it considers ideal to boost the competitiveness of the country's exporters without stoking inflation. Backing expectations of more monetary stimulus ahead in Europe, Germany's Constitutional Court approved the euro zone's new bailout fund. The court's green light was a key requirement for the ECB's plan to buy bonds of struggling euro members. Other Latin American currencies slipped as investors turned cautious before a U.S. Federal Reserve decision on Thursday. Many have bet that U.S. policymakers would unveil another round of monetary stimulus to boost the economy, but analysts said uncertainty was pushing some investors to take profits on a recent string of gains in local currencies. "We think the market has priced in to a good degree the possibility that the Fed will announce a new program, which is really the hardest thing to predict," said Juan Carlos Alderete, a strategist at Banorte-IXE in Mexico City. The Mexican peso weakened 0.14 percent to 13.0130 per dollar after touching its strongest since early May during the session, while Chile's peso dipped 0.1 percent, falling back from a one-year high hit earlier in the day. Mexico's central bank chief said on Wednesday that recent gains in the peso would help curb inflationary pressures by cheapening imports and he said there would be no need to raise Mexican interest rates if inflation cools. Mexico's annual inflation rate rose above the central bank's 4 percent limit in June and hit a nearly 2-1/2 year high in August. But investors are betting the central bank will keep its benchmark interest rate at 4.50 percent in the coming months due to the risks of slowing global growth. Latin American FX prices at 2100 GMT: Currencies daily % year-to- change ate % Latest change Brazil real 2.0254 -0.49 -7.75 Mexico peso 13.0130 -0.14 7.35 Argentina peso* 6.3000 0.00 -24.92 Chile peso 474.7000 -0.11 9.40 Colombia peso 1,801.1500 -0.26 7.62 Peru sol 2.6040 0.04 3.57 * Argentine peso's rate between brokerages Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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