EMERGING MARKETS-Latam FX gains, Brazil steps up intervention

* Mexico peso at 5-mo high, Chile peso at over 1-yr high
* Brazil intervenes twice as real nears level of 2/dlr
* Mexico peso gains 0.65 pct, Brazilian real up 0.34 pct

By Michael O'Boyle and Walter Brandimarte
MEXICO CITY/SAO PAULO, Sept 14 (Reuters) - Latin American
currencies firmed Friday on bets that more U.S. monetary
stimulus will push a flood of investment into the region, with
Brazil's real firming despite stepped-up intervention efforts.
The Mexican peso rose to more than a five-month high and the
Chilean peso firmed to its strongest level in more than a year
after Thursday's news of a third round of monetary stimulus by
the U.S. Federal Reserve boosted riskier assets around the
globe.
The Fed's previous stimulus programs since the 2008
financial crisis spurred gains in riskier assets as investors
took proceeds from Fed purchases to invest in higher-yielding
assets, such as Latin American local currency debt.
But those currency gains cut into the profits of local
industries, which make less on their exports and are undermined
by cheaper imports.
Weak growth in Brazil and Colombia could push authorities to
take aggressive measures in the face of a new wave of investment
flows, analysts said.
"You are going to see more pressure for these emerging
market currencies to strengthen and the result of that will be
more intervention from central banks," said Clyde Wardle, a
strategist at HSBC in New York.
Brazil's central bank intervened twice in a span of two
hours, selling currency swap contracts that mimic the purchase
of dollars in the futures market.
But the Brazilian real still bid 0.34 percent
stronger at the local close at 2.0196 per dollar, edging closer
to the 2 per dollar level the central bank is seen defending.
Governments from Brazil to Colombia have pledged to protect
their economies against fallout from the U.S. Federal Reserve's
measures. The Fed announced on Thursday plans to buy $40 billion
of mortgage debt per month until the U.S. jobs market improves.
While the Fed set no dollar limits on their purchases, a Reuters
poll of analysts showed they expect this round of stimulus to
total about $600 billion.
Mexico, which sends nearly 80 percent of its exports to its
northern neighbor, could benefit the most from stronger growth
in the United States.
"Evidently, the expectation that the monetary authority is
once again helping the U.S. economy is also favoring the Mexican
economy," said Rafael Camarena, an economist at Santander in
Mexico City.
The Mexican peso led gains in the region, rising 0.65
percent to 12.74 per dollar.
Investors consider the Mexican central bank as the least
likely to intervene in currency markets. The central bank is
committed to a free-floating currency and a stronger peso could
also help policymakers fight a recent spike in inflation.
Chile's peso firmed 0.45 percent to bid at 470.60
per dollar and analysts saw the odds of central bank
intervention growing.
"The market is going to be careful in pushing the peso
further due to the specter of central bank intervention," said
Rodrigo Sarria, a trader at Celfin Capital.
Colombia's peso closed little changed after the
country's finance minister suggested the central bank could step
up intervention efforts as well as cut the country's benchmark
interest rate to curb the appeal of the peso to yield-hungry
investors.

BRAZIL STEPS UP FIGHT
Brazil has led the fight against dollar inflows in the
region as Finance Minister Guido Mantega pledged to use an
"arsenal" of measures to stop the real's appreciation.
Since early July, the Brazilian government has managed to
keep the real trading between 2.0 and 2.1 units per dollar -- a
narrow range that it considers beneficial to exporters without
stoking inflation.
That range has only been maintained with aggressive central
bank intervention, however.
On Thursday alone, Brazil's central bank offered to sell up
to 70,000 swap contracts maturing on Nov. 1 and Dec. 3 as the
real neared the level of 2 per dollar. Earlier, it had sold
36,000 swap contracts worth $1.78 billion, but that was not
enough stop the real from appreciating.
"There is no mystery, what is driving the real higher is the
Fed. Let's see for how long this 2-per-dollar floor will hold,"
said Luiz Fernando Genova, a currency trader at Daycoval bank.

Latin American FX prices at 2130 GMT:

Currencies daily % year-to-
change ate %
Latest change
Brazil real 2.0113 0.31 -7.10

Mexico peso 12.7400 0.65 9.65

Argentina peso* 6.2900 0.16 -24.80

Chile peso 470.6000 0.45 10.35

Colombia peso 1,793.5000 0.02 8.08

Peru sol 2.5940 0.12 3.97

* Argentine peso's rate between
brokerages