EMERGING MARKETS-Brazil real, Chile peso drop on verbal intervention

Tue Jan 8, 2013 3:43pm EST

* Chile finance ministry, central bank to discuss peso
strength
    * Brazil won't roll over dollar auctions with repo agreement
-Estado
    * Brazil real drops 0.5 percent; Mexican peso drops 0.3
percent

    By Danielle Fonseca and Moises Avila
    SAO PAULO/SANTIAGO, Jan 8 (Reuters) - The Brazilian real
dropped on Tuesday on signs that the country's central bank does
not want the currency to gain much further, while the Chilean
peso weakened after that country's finance minister expressed
concern about the impact of a strong exchange rate on exports.
    Most Latin American currencies also fell as investors took a
weak Wall Street session as a cue to pocket part of a recent
rally, driving the Mexican peso 0.25 percent lower.
    Brazil's real  led losses in the region,
falling 0.4 percent to 2.0373 per dollar, after local news
agency Estado quoted an anonymous central bank source as saying
that, at current exchange rates, the bank would not roll over
the dollars it had sold with repurchase agreements late last
year.
    "That could be an indication that the central bank doesn't
want the real too close to two per dollar," said a trader at a
large Brazilian bank.
    A central bank spokesman said the bank would not comment on
a story based on an anonymous source.
    Those dollar auctions were part of Brazil's strategy to
provide liquidity to the foreign exchange market at the end of
the year, when greenbacks are usually more scarce as Brazilians
vacation abroad and foreign companies remit profits to their
headquarters.
    Although the central bank's most recent intervention was 
designed to strengthen the real and avoid additional inflation
pressures, analysts believe policymakers also do not want the
real to gain past two per dollar, which could hurt exporters.
    In Chile, the peso erased early gains to close 0.21
percent weaker at 472.20 per dollar after Finance Minister
Felipe Larrain said the government and the central bank may come
up with "coordinated action" to prevent the currency from
gaining further. 
    The Chilean peso has rallied more than 1 percent in the
first few days of 2013, on top of gains of nearly 8.5 percent in
2012.
    "The peso started the day stronger as foreign banks sold
dollars," said Eugenio Cortes, head of forward contracts at
EuroAmerica. The currency pierced the level of 470 per dollar
when investors started buying dollars again and the finance
minister came with his "verbal intervention," he added.
    Local analysts say the central bank would be compelled to
intervene if the peso strengthens past 467 to the dollar.
            
    Latin American FX prices at 2010 GMT:
    
 Currencies                         Daily  YTD pct
                                      pct   change
                          Latest   change  
 Brazil real              2.0373    -0.39    -0.05
                                           
 Mexico peso             12.7970    -0.25     0.53
                                           
 Argentina peso*          7.0300     0.14    -3.56
                                           
 Chile peso             472.2000    -0.21     1.38
                                           
 Colombia peso        1,771.9900    -0.07    -0.34
                                           
 Peru sol                 2.5470    -0.08     0.16
                                           
 * Argentine peso's rate between                  
 brokerages
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