EMERGING MARKETS-Brazil real rises on central bank's moves

Mon Dec 3, 2012 7:01pm EST

* Brazil central bank calls swap, dollar auctions to support
real
    * Risk appetite sours on contraction in U.S. manufacturing
    * Brazil real up 0.51 pct, Mexico peso edges down 0.25 pct


    By Walter Brandimarte and Jean Arce
    RIO DE JANEIRO/MEXICO CITY Dec 3 (Reuters) - The Brazilian
real gained on Monday after the country's central bank threw its
weight into the market to drag the currency off a 3-1/2-year low
while other Latin American currencies slipped on weak U.S.
factory data.
    The central bank carried out a series of interventions,
which included two currency swap auctions in the morning and two
dollar auctions on the spot market in the afternoon.
 
    Despite the magnitude of the actions, investors believe the
central bank is not defending a specific level. 
    Rather, policymakers are likely trying to smooth out the
slump in the real, which lost 4.7 percent in November, half of
that at the end of the month. 
    Other members of the government have said they want a weaker
currency to help manufacturers lift exports and better compete
against imports. Brazil has been deploying an array of policies
such as tax and energy price cuts in a bid to spur growth.
    "We still don't know how much weaker the government wants
the currency to be," said Joao Medeiros, a currency director at
Pioneer brokerage.
    The real bid 0.5 percent stronger at 2.1190 per U.S.
dollar. The currency had dropped to 2.1382 per dollar, its
weakest level since early May 2009. 
    Wagers against the real greatly increased on Friday after
data showed the Latin America's biggest economy grew in the
third quarter at half the rate expected by economists. 
    Concerns that an incipient economic recovery may be again
flagging in Brazil is stoking bets that the central bank will
hold interest rates at a record low for longer than expected,
undercutting the appeal of local assets to investors. 
    Others are being put off by the government's meddling in the
economy as it seeks to revive growth. Major banks are telling
investors to cut exposure to the currency.
    "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. 
    Other Latin American currencies weakened on U.S.
manufacturing data, which unexpectedly contracted in November,
falling to its lowest level in over three years. 
    The Mexican peso lost 0.25 percent on Monday to
12.9966 per dollar as it pulled back from a six-week high.
    But analysts and investors remained confident about the
Mexican peso's longer-term prospects.
    Mario Copca, an analyst at CI Casa de Bolsa in Mexico City,
said he expected the peso to appreciate in the next few days to
12.68-12.60 per dollar. He doubted the peso would weaken back
past the psychological 13.00 per dollar level.   
    Data on Friday showed bets by speculators in favor of a
stronger peso on the Chicago exchange rose for the first time in
seven weeks last week, jumping about $271 million to $3.6
billion by Nov. 27.
    Mexico's peso was one of the top emerging market bets early
this year, pushing the position in Chicago to a record high of
$5.5 billion in late September before a sharp slump in the peso
pushed investors to stop-loss levels. 

    Latin American FX prices at 22:41 GMT
    
 Currencies                            daily %  year-to-
                                        change     ate %
                              Latest              change
 Brazil real                  2.1190      0.51    -11.82
                                                
 Mexico peso                 12.9966     -0.25      7.49
                                                
 Argentina peso*              6.4200      0.31    -26.32
                                                
 Chile peso                 481.4000     -0.12      7.87
                                                
 Colombia peso            1,815.3000     -0.02      6.78
                                                
 Peru sol                     2.5800     -0.08      4.53
                                                
 * Argentine peso's rate between                        
 brokerages
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