EMERGING MARKETS-Brazil currency volatile as policy moves eyed

Wed Jun 12, 2013 10:14am EDT

* Brazil investors watching for fiscal measures, IOF changes
    * Real swings widely, Mexican peso flat, Chilean peso gains

    SAO PAULO, June 12 (Reuters) - Brazil's currency swung
between gains and losses on Wednesday as uncertainty over the
possible ratcheting down of the U.S. Federal Reserve's
bond-buying program and potential local tax changes kept
investors cautious.
    "The market is a bit lost," said Gustavo Mendonca, an
economist with Saga Capital in Rio de Janeiro. "Without any
further information on the outlook for the Fed's stimulus
program, we are seeing this volatility." 
    Last week Brazil's government scrapped a 6 percent IOF
financial transactions tax on foreign investment into local
bonds, helping slow the currency's weakening trend though adding
to exchange rate volatility.
    "There are expectations that the government is looking at
measures to reduce the IOF tax on foreign exchange derivatives,
so banks may be looking at that and betting on a fall in the
dollar," said Glauber Romano, a trader with Intercam Corretora
in Sao Paulo. 
    Brazil's Finance Minister Guido Mantega said the government
was committed to reaching an already-reduced fiscal savings
target this year even if that meant making spending cuts,
according to a newspaper interview published Wednesday.
 
    Mantega's interview didn't have much of a short-term market
impact but it reinforces expectations the government will
announce spending cuts soon, Mendonca said.
    The Brazilian real  reversed early gains,
dropping for the third day in four to trade about 0.3 percent
lower against the U.S. dollar. The real is down about 4.7
percent against the dollar this year.
    The Mexican peso was little changed at 12.833 per
dollar while the Chilean peso strengthened 0.50 percent
to 498.9 per dollar.

    Key Latam currencies at 1404 GMT:
 Currencies                               daily %     YTD %
                                           change    change
                                 Latest            
 Brazil real                     2.1411     -0.29     -4.72
                                                   
 Mexico peso                    12.8331     -0.08      0.24
                                                   
 Chile peso                    498.9000      0.50     -4.05
                                                   
 Colombia peso                1893.5500      0.62     -6.74
                                                   
 Peru sol                        2.7400      0.18     -6.90
                                                   
 Argentina peso (interbank)      5.3100      0.05     -7.49
                                                   
 Argentina peso (parallel)       8.5200      0.35    -20.42
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