Brazil real eases after reverse forex swap auction

(Updates with closing prices)

SAO PAULO May 5 (Reuters) - Brazil's currency eased on Tuesday, giving up early gains after the central bank sold about $3.41 billion in reverse currency swaps, a change of tack after the real had rallied in recent weeks.

Brazilian stocks, meanwhile, crept higher in a volatile session, as world bourses touched their highest levels in nearly four months earlier on Tuesday. Sao Paulo's main stock index, the Bovespa .BVSP gained 0.53 percent to 50,669.78 points after a 6.6 percent rally in the previous session.

Brazil's currency, the real BRBY, gave up gains after the bank announced the first reverse currency swap auction in seven months, and extended losses after the sale. It closed 0.84 percent weaker at 2.149 per U.S. dollar.

The aim of the auction is to soak up excess dollars in the foreign exchange market. The real strengthened more than 6 percent in April and is up more than 8 percent on the year.

The central bank sold all 67,600 reverse swap contracts on offer in the auction it said was due to a change in dollar flows in recent weeks. It said it was not pursuing a currency target.

"The real is strengthening quickly. Maybe this is leaving the central bank a bit uncomfortable and this could have reinforced the decision to carry out the auction," said Rinaldo Galhardo head of foreign exchange at brokerage Treviso Corretora de Cambio.

Some analysts said the central bank wanted to help bolster a rising trade surplus by preventing a strong currency from fueling imports. Data showed on Monday that Brazil's trade surplus doubled in April from a year ago, as imports fell at a faster rate than exports.

"(The central bank) wants to try to maintain exports at high levels," said Gerson de Nobrega, Treasury desk manger at Banco Alfa de Investimento.

At the stock exchange, gains were led by heavyweight oil giant Petrobras and banking stocks, as foreign investors bought into the market.

State-run Petrobras (PETR4.SA) surged 1.42 percent to 32.08 reais even as oil prices eased.

Banks also rose even as Itau Unibanco ITAU4.SA, Latin America's largest by assets, posted a 5.8-percent drop in first-quarter profit.

Itau jumped 2.46 percent to 32.85 reais, Banco do Brasil (BBAS3.SA) gained 1.09 percent to 19.55 reais and Banco Bradesco (BBDC4.SA) surged 2.54 percent to 29.10 reais.

Investors appeared to ignore data showing industrial output in Brazil slumped 10 percent in March on a year-on-year basis, while auto sales tumbled 10.3 percent in April from a year earlier despite government tax breaks for the industry.

Interest rate futures <0#DIJ:> were mostly lower nearly a week after the central bank cut rates to new record lows and left the door open for further monetary easing down the line.