EMERGING MARKETS-Brazil real leads Latam currencies higher

Mon Dec 10, 2012 4:16pm EST

* Brazil central banker says real has room to appreciate
    * Positive Wall Street session supports Latam currencies
    * Chile's peso closes at nearly 2-month high
    * Brazil real gains 0.7 pct, Mexico peso up 0.4 pct

    By Walter Brandimarte
    RIO DE JANEIRO, Dec 10 (Reuters) - Brazil's real gained on
Monday after a central bank director said the currency still has
room to appreciate, adding to expectations that the government
may further intervene in the foreign exchange market.
    Other Latin American currencies also strengthened as a
positive Wall Street session fueled investors' appetite for
risk, while Venezuela's bonds rallied after ailing President
Hugo Chavez named a successor, raising the prospect of his
departure after 14 years in power.
    The Brazilian real  closed 0.7 percent stronger
at 2.0765 per dollar after Aldo Mendes, the central bank's
director of monetary policy, said the currency was slightly
weaker than the level projected by a central bank model.
 
    Mendes repeated the central bank was ready to supply dollars
to the market at the end of the year, when demand for greenbacks
usually grows as foreign companies send profits home to close
annual accounts.
    The real had already opened stronger after the central bank
warned late on Friday, just as the currency weakened to near 2.1
per dollar, that it was conducting a survey to gauge demand for
dollars in the foreign exchange market. 
    "That sounds to me like the central bank is defending the
level of 2.10 per dollar," said a currency trader with a large
Brazilian bank in Sao Paulo.
    The survey could lead the central bank to auction
traditional currency swaps -- derivatives that emulate the sale
of dollars in the foreign exchange market -- or to sell dollars
directly on the spot market with repurchase agreements. 
    None of those operations took place on Monday, but the
central bank's warning was enough to support the real during the
entire session and lead investors to believe the bank wants the
currency to remain within the narrow trading band of 2.0-2.1
reais per dollar where it has been stuck since early July.
    "I still believe the central bank is upholding this trading
band," said Mario Battistel, a manager at the currency desk of
Fair brokerage.
    The Mexican peso rose 0.4 percent to 12.8975 per
dollar while the Chilean peso gained 0.3 percent to
475.50 per dollar, its strongest level in nearly two months.
    "All the fundamentals seem to be supporting the (Chilean)
peso today," said a currency trader in Santiago, citing stock
gains and a rise in the price of copper, Chile's main export
product.
    In Venezuela, news that President Hugo Chavez was returning
to Cuba for more cancer surgery fueled speculation of a regime
change in the oil exporting nation. 
    Foreign investors, who believe Chavez's policies are
detrimental to the country's economic prospects, responded by
driving the price of Venezuelan bonds sharply higher.
    The bond maturing in 2027 jumped 2.25 points
higher to bid 101.00 cents to the dollar, its highest level
since February 2008.

    Latin American FX prices at 2040 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0765     0.70   -10.02
                                             
 Mexico peso               12.8085     0.36     9.06
                                             
 Argentina peso*            6.4300     0.62   -26.44
                                             
 Chile peso               475.5000     0.27     9.21
                                             
 Colombia peso          1,799.1000    -0.13     7.74
                                             
 Peru sol                   2.5710     0.04     4.90
                                             
 * Argentine peso's rate between                    
 brokerages
FILED UNDER: