EMERGING MARKETS-Brazil real weakens as cenbank halts swap rollover

Fri Apr 25, 2014 11:05am EDT

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RIO DE JANEIRO, April 25 (Reuters) - The Brazilian real fell
on Friday on signs that the central bank will no longer roll
over forex swaps that expire early next month, slightly reducing
the supply of currency hedges.
    Other currencies and key stock indexes in Latin America were
also lower as geopolitical tension increased in Ukraine, with
Moscow warning Kiev that it would "face justice" for killing
pro-Russian rebels a day earlier. 
    MSCI's benchmark stock index for Latin America
 dropped more than 1 percent while the currencies
of Mexico, Colombia and Peru fell 0.2 ent
or more. The Chilean peso posted more modest losses of 0.1
percent.
    "The Ukraine issue is sparking risk aversion and investors
are fleeing emerging markets," said Reginaldo Siaca, a manager
at the currency desk of Advanced brokerage in Sao Paulo.
    The real  led losses in the region, dropping 0.7
percent to 2.2311 per dollar, after the central bank early on
Friday did not hold an expected auction to roll over currency
swaps that mature in the beginning of May. 
    They are derivative contracts that support the exchange rate
as they provide investors with protection against a 
depreciation of the real. 
    The central bank has already rolled over 74 percent of the
$8.7 billion worth of swaps that expire early in May. Last
month, it renewed 75 percent of the swaps that matured in the
beginning of April.
    "It is possible that the central bank sees the current level
of the real as being sufficient to keep inflation in check to
allow them to stop hiking (interest rates) at the next (monetary
policy) meeting," Citi analyst lam Kenneth wrote in a note to
clients.    
 
    
    Key Latin American stock indexes and currencies at 1445 GMT:
     Stock indexes                    daily %    YTD %
                       Latest         change     change
 MSCI Emerging         993.26         -1.12      0.18
 Markets                                         
 MSCI LatAm            3222.76        -1.14      1.85
                                                 
 Brazil Bovespa        51206.6        -1.18      -0.58
                                                 
 Mexico IPC            40097.14       -0.77      -6.16
                                                 
 Chile IPSA            3845.82        -0.6       3.96
                                                 
 Chile IGPA            18931.05       -0.49      3.86
                                                 
 Argentina MerVal      6667.15        -0.9       23.67
                                                 
 Colombia IGBC         13377.12       0.29       2.34
                                                 
 Peru IGRA             15154.19       0.16       -3.81
                                                 
 Venezuela IBC         2314.99        -3.27      -15.41
                                                 
                                                 
 Currencies                           daily %    YTD %
                              Latest  change     change
 Brazil real           2.2311         -0.73      5.63
                                                 
 Mexico peso           13.1312        -0.24      -0.77
                                                 
 Chile peso            560            -0.05      -6.05
                                                 
 Colombia peso         1943.99        -0.34      -0.62
                                                 
 Peru sol              2.801          -0.36      -0.29
                                                 
 Argentina peso        8.0000         0.03       -18.84
 (interbank)                                     
                                                 
 Argentina peso        10.69          0.19       -6.45
 (parallel)                                      
                                                 
 
 (Reporting by Walter Brandimarte, Priscila Jordao and Bruno
Federowski; Editing by Nick Zieminski and Steve Orlofsky)
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