EMERGING MARKETS-Brazil real rallies as central bank intervenes

Mon Dec 3, 2012 12:05pm EST

* Brazil cenbank calls two swap auctions to support real
    * Data on China manufacturing revival supports risk appetite
    * Brazil real jumps 0.9 pct, Mexico peso gains 0.2 pct

    By Walter Brandimarte
    RIO DE JANEIRO, Dec 3 (Reuters) - The Brazilian real rallied
over 1 percent on Monday after the central bank acted to prop up
the currency from a 3-1/2-year low, while data showing a Chinese
manufacturing pickup supported  Latin American currencies in
general.
    The real  had dropped to 2.1382 per dollar, its
weakest level since early May 2009, when the central bank called
two consecutive auctions to sell traditional currency swaps --
derivative contracts that support the real by emulating the sale
of dollars in the futures market. 
    The real erased its losses and jumped as much as 1.6 percent
after the auctions, which suggested the central bank was not
comfortable with the currency's fast depreciation pace. It last
traded 0.9 percent stronger at 2.1115 per dollar.
    "The central bank's actions suggest the real at 2.10 per
dollar would be a comfortable level to boost exports without
fueling inflation," said a trader with a large Brazilian bank. 
    Bets on a weaker real greatly increased after data showed
the Brazilian economy grew at half the rate economists expected
in the third quarter. Banks such as JP Morgan recommended
investors reduce their holdings of real. 
    "A deterioration in the investment perspective -- confidence
has been hit hard by government activism and mediocre growth --
explains a significant part of the revision," JP Morgan analysts
wrote in a report released after the close of the Brazilian
foreign exchange market on Friday.
    The bank recommended investors hedge 20 percent of their
exposure to the Brazilian real.
    While economists expect the government to favor a weaker
currency to boost exports, the central bank is unlikely to allow
the real to slide too much, too fast. The Brazilian currency
lost 4.7 percent in November, 2.3 percent of that just in the
last week of the month.
    "The real had weakened too quickly last week," said Luiz
Fernando Genova, a currency trader with Banco Daycoval in Sao
Paulo. "The central bank doesn't want such fast moves."
    Investors' appetite for risk also supported the real and
other Latin American currencies after data showed China's
manufacturing sector expanded in November for the first time
since October 2011. 
    Gains were capped, however, after data showed U.S.
manufacturing unexpectedly contracted in November.
 
    The Mexican peso gained 0.2 percent while the
Colombian peso <COP=STFX and the Peruvian sol were
little changed. The Chilean peso edged lower 0.1
percent.

    Latin American FX prices at 1625 GMT
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.1115     0.87   -11.51
                                             
 Mexico peso               12.9410     0.18     7.95
                                             
 Argentina peso*            6.4200     0.31   -26.32
                                             
 Chile peso               481.3000    -0.10     7.90
                                             
 Colombia peso          1,814.8500     0.01     6.81
                                             
 Peru sol                   2.5780     0.00     4.62
                                             
 * Argentine peso's rate between                    
 brokerages
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