EMERGING MARKETS-Brazil real falls on intervention, Mexican peso down

* Brazil cenbank sells reverse currency swaps to weaken real
* Chilean markets closed for holiday, reopening on Thursday

By Natalia Cacioli
SAO PAULO, Sept 17 (Reuters) - The Brazilian real weakened
about 1 percent on Monday as the central bank intervened to
offset possible dollar inflows stemming from U.S. stimulus
measures, while the Mexican peso fell slightly after closing on
Friday at a more than five-month high.
Latin American currencies still looked poised to appreciate
after last week's decision by the U.S. Federal Reserve to launch
a third round of its bond-buying program. The move is likely to
flood emerging markets with dollars, driving exchange rates
higher and potentially hurting the region's exports.
In Brazil, the government has so far been able to dodge the
effects of the Fed's measures by stepping up intervention in the
foreign exchange market. In less than one week, the central bank
has sold about $5.7 billion worth of reverse currency swaps,
derivative contracts that mimic the purchase of dollars in the
futures market.
The swaps were sold in four separate auctions, whenever the
real strengthened toward the level of 2 per dollar. The latest
of them, conducted by the central bank this morning, drove the
currency about 1 percent weaker to 2.0304 per
dollar, within the narrow range of 2.0-2.1 units per dollar the
it has been trading since early July.
"What's important is that the central bank gave a warning
sign and markets are observing it," said Italo dos Santos, a
currency specialist with Icap brokerage in Sao Paulo.
"The market was very quiet, with small volumes, and that
attracts speculators. The central bank's goal is to provide
liquidity, driving away the speculators and ensuring a
functional market," he added.
In Mexico, the peso weakened 0.3 percent to 12.7839
per dollar as investors took a breather after driving the
currency to its strongest level in more than five months on
Friday.
The Mexican peso has been driving gains in Latin America as
investors consider the Mexico's central bank as the least likely
to intervene in currency markets. The bank is committed to a
free-floating currency and a stronger peso could also help
policymakers fight a recent spike in inflation.
The Chilean markets are closed for a national holiday and
will reopen on Thursday.

Latin American FX prices at 1805 GMT:

Currencies daily % YTD %
change change
Latest
Brazil real 2.0290 -0.91 -7.91

Mexico peso 12.7839 -0.34 9.27

Argentina peso* 6.2700 0.64 -24.56

Chile peso holiday n/a 10.35

Colombia peso 1,798.5000 -0.28 7.78

Peru sol 2.6010 -0.27 3.69

* Argentine peso's rate between
brokerages