EMERGING MARKETS-Brazil real drops on finmin comments, cenbank intervenes
* US GDP disappointment weighs on Latin American currencies * Brazil real drops as Mantega says dollar "will not melt down" * Real trims losses as central bank sells dollars By Walter Brandimarte RIO DE JANEIRO, Jan 30 (Reuters) - The Brazilian real weakened on Wednesday, following gains of over 2 percent since the beginning of the week, after Finance Minister Guido Mantega warned that the government was ready to correct any excessive moves in the exchange rate. The real trimmed its losses, however, after the central bank announced it was selling dollars with an agreement to repurchase them in two months, effectively rolling over a line worth some $1.2 billion that expires later in the week. The real closed at 1.9875 per dollar, 0.2 percent weaker than Tuesday's close. An unexpected contraction in the U.S. fourth-quarter GDP also weighed on Latin American foreign exchange markets in general, keeping the currencies of Mexico and Chile little changed against the dollar. Disappointment over the performance of the world's largest economy tamed investors' appetite for taking risk in emerging markets. MONETARY POLICY INSTRUMENT? The Brazilian central bank's decision to roll over its $1.2 billion line was seen by analysts as the latest sign that the monetary authority is willing to keep the real weaker than 2 per dollar to help anchor inflation expectations. "The central bank is using the currency as an instrument of monetary policy," said Paulo Petrassi, a partner at Leme Investimentos in Florianopolis, Brazil. "I believe the real will now trade between 1.96 and 2.0 per dollar -- that is a level that helps curb inflation without hurting the competitiveness of industry." The central bank's action came right after Mantega's comments weakened the real to nearly 2 per dollar. The real had strengthened past that level on Tuesday as a central bank decision to roll over some currency swaps was interpreted as a green light for a stronger exchange rate in the short term. Piercing the 2-per-dollar mark was a symbolic development in Brazil's foreign exchange market because that had been a limit to an informal trading band of 2.0-2.1 per dollar in effect since early July. For most of last year, the central bank intervened in the market to weaken the real in a strategy to benefit exporters and boost local industry. Just as late as November, Mantega had promised Brazilian businessmen that a real weaker than 2 per dollar "was here to stay." Despite the recent rally, Mantega still sounded comfortable with the current exchange rate, telling reporters in Brasilia that the real has been "spontaneously moving to a more balanced level." He warned, however, that the government would correct any "excesses" in the exchange rate and assured that the dollar would not "melt down" against the real. Latin American FX prices at 1950 GMT: Currencies daily % YTD % change change Latest Brazil real 1.9875 -0.18 2.64 Mexico peso 12.7300 -0.08 1.05 Chile peso 471.1000 0.08 1.61 Colombia peso 1776.5100 -0.19 -0.59 Peru sol 2.5670 -0.23 -0.62 Argentina peso 4.9775 -0.05 -1.31 Argentina peso 7.8900 -1.14 -14.07
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Four dead in apparent Connecticut murder-suicide
- South Korea expands air defense zone to partially overlap China's |
- Singer Susan Boyle reveals she has Asperger's syndrome: paper
- Winter storm pushes up U.S. East Coast after deep-freeze in the South