Reuters: US Dollar Report: EMERGING MARKETS-Brazil real, Chile peso drop on verbal intervention

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EMERGING MARKETS-Brazil real, Chile peso drop on verbal intervention Jan 8th 2013, 20:43 Tweet Share this Email Print Tue Jan 8, 2013 3:43pm EST * Chile finance ministry, central bank to discuss peso strength * Brazil won't roll over dollar auctions with repo agreement -Estado * Brazil real drops 0.5 percent; Mexican peso drops 0.3 percent By Danielle Fonseca and Moises Avila SAO PAULO/SANTIAGO, Jan 8 (Reuters) - The Brazilian real dropped on Tuesday on signs that the country's central bank does not want the currency to gain much further, while the Chilean peso weakened after that country's finance minister expressed concern about the impact of a strong exchange rate on exports. Most Latin American currencies also fell as investors took a weak Wall Street session as a cue to pocket part of a recent rally, driving the Mexican peso 0.25 percent lower. Brazil's real led losses in the region, falling 0.4 percent to 2.0373 per dollar, after local news agency Estado quoted an anonymous central bank source as saying that, at current exchange rates, the bank would not roll over the dollars it had sold with repurchase agreements late last year. "That could be an indication that the central bank doesn't want the real too close to two per dollar," said a trader at a large Brazilian bank. A central bank spokesman said the bank would not comment on a story based on an anonymous source. Those dollar auctions were part of Brazil's strategy to provide liquidity to the foreign exchange market at the end of the year, when greenbacks are usually more scarce as Brazilians vacation abroad and foreign companies remit profits to their headquarters. Although the central bank's most recent intervention was designed to strengthen the real and avoid additional inflation pressures, analysts believe policymakers also do not want the real to gain past two per dollar, which could hurt exporters. In Chile, the peso erased early gains to close 0.21 percent weaker at 472.20 per dollar after Finance Minister Felipe Larrain said the government and the central bank may come up with "coordinated action" to prevent the currency from gaining further. The Chilean peso has rallied more than 1 percent in the first few days of 2013, on top of gains of nearly 8.5 percent in 2012. "The peso started the day stronger as foreign banks sold dollars," said Eugenio Cortes, head of forward contracts at EuroAmerica. The currency pierced the level of 470 per dollar when investors started buying dollars again and the finance minister came with his "verbal intervention," he added. Local analysts say the central bank would be compelled to intervene if the peso strengthens past 467 to the dollar. Latin American FX prices at 2010 GMT: Currencies Daily YTD pct pct change Latest change Brazil real 2.0373 -0.39 -0.05 Mexico peso 12.7970 -0.25 0.53 Argentina peso* 7.0300 0.14 -3.56 Chile peso 472.2000 -0.21 1.38 Colombia peso 1,771.9900 -0.07 -0.34 Peru sol 2.5470 -0.08 0.16 * 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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