EMERGING MARKETS-Brazil real touches 2.05/dlr in thin market

Tue Jan 22, 2013 2:05pm EST

* Inflation fears may prevent real weakening much more
    * Chilean peso up as copper rises with Japan stimulus
    * Mexican peso gains with Wall Street

    RIO DE JANEIRO, Jan 22 (Reuters) - The Brazilian real
dropped on Tuesday as thin trading volumes left the exchange
rate vulnerable to small capital outflows, but analysts said the
currency is unlikely to weaken much past the level of 2.05 per
dollar for fear of inflation.
    The real  weakened to 2.05-per-dollar early in
the session, but quickly backed off as investors feared the
central bank would eventually intervene to halt any sharper
depreciation that could drive the prices of imported goods
higher.
    It last traded at 2.0435 per dollar, little changed from
Monday's close.
    "We might have had localized dollar outflows. Trading is
very thin and any flows have an impact on the exchange rate,"
said Waldir Kiel, a trader at the H.Commcor brokerage in Sao
Paulo.
    The real has been slowly approaching the level of 2.05 per
dollar - the upper limit of the narrow trading range in which it
has been stuck since late December - as dollar inflows have been
smaller than anticipated in the beginning of the year, Kiel
said.
    "But the medium- to long-term trend is for slightly larger
inflows that could take the real back" to 2.0 per dollar, Kiel
said.
    
    JAPANESE STIMULUS SUPPORTS CHILEAN PESO
    Elsewhere in Latin America, the Chilean peso gained
0.34 percent to 470.60 per dollar as news of additional monetary
stimulus in Japan boosted the price of copper, Chile's main
export.
   The Mexican peso rose 0.3 percent, recovering partly
from two consecutive sessions of losses, as investors cautiously
awaited a series of U.S. earnings results to better gauge the
economic strength of the United States, Mexico's main trading
partner.
    The Mexican currency lost about 0.8 percent in the past two
sessions after the central bank warned it could lower interest
rates if inflation continues to cool and the economy loses
steam. 
    In Colombia, the peso fell 0.5 percent to
1,777.75 as a Reuters survey showed economists expect the
central bank to cut interest rates and take other steps to
reduce the allure of the currency. 

    Latin American FX prices at 1840 GMT:
    
 Currencies                         daily %    YTD %
                                     change   change
                            Latest           
 Brazil real                2.0435    -0.03    -0.17
                                             
 Mexico peso               12.6543     0.29     1.66
                                             
 Chile peso               470.6000     0.34     1.72
                                             
 Colombia peso           1777.7500    -0.48    -0.66
                                             
 Peru sol                   2.5530    -0.04    -0.08
                                             
 Argentina peso             4.9550     0.05    -0.86

 Argentina peso             7.4000     0.54    -8.38
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