EMERGING MARKETS-Brazil real drops as central bank slows swap rollover

Mon May 5, 2014 11:56am EDT

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RIO DE JANEIRO, May 5 (Reuters) - Brazil's real weakened on
Monday as the central bank slowed the rollover of currency
swaps, derivatives designed to support the exchange rate, that
expire early next month.
    Concerns about an economic deceleration in China and growing
geopolitical tension in Ukraine contributed to the real's
weakness and weighed on other Latin American currency and stock
markets, most of which were flat to lower.
    The real  dropped 0.7 percent to 2.2328 per U.S.
dollar following a central bank's Friday announcement that it
would start rolling over the $9.65 billion worth of currency
swaps that mature on June 2 with the offer of 5,000 new
contracts on Monday.
    In previous months, the central bank offered 10,000 new
swaps a day to roll over expiring contracts.
    "The reduction in the swap supply shows the central bank is
comfortable with the real at current levels, said Reginaldo
Siaca, a manager at the currency desk of Advanced brokerage in
Sao Paulo.
    Tarcisio Rodrigues, director of the currency desk at Banco
Paulista in Sao Paulo, said dollars were flowing into Brazil on
Monday, but concern about "Ukraine and China, as well as the
reduced swap rollover by the central bank, are weighing on the
real."
    Fear that China, the world's second-largest economy, may
still be losing momentum increased after data showed the
country's manufacturing sector contracted for a fourth
consecutive month in April. China is a major destination for
Latin America's commodities exports. 
    Investors were also cautiously watching the development of
the crisis in Ukraine, where paramilitary police were killed in
fighting with pro-Russian separatists near the rebel stronghold
of Slaviansk. 
    Mexico's peso was little changed at 13.0105 per
dollar, while the country's benchmark IPC stock index 
slid 0.1 percent.
    Brazil's benchmark Bovespa index rose 0.4 percent,
however, as investors continued to focus on opinion polls that
showed President Dilma Rousseff has been losing popular support
ahead of presidential elections in October. 
    Investors, who have blamed Rousseff's interventionist
policies for Brazil's low growth rates, are encouraged by the
possibility of a more market-friendly government in 2015.
    "The latest surveys show growing chances that we have a
run-off vote in October," said Felipe Rocha, an analyst with
Omar Camargo brokerage in Curitiba.
    Brazil's latest electoral survey, released on Saturday,
showed Rousseff losing ground to Senator Aecio Neves of the
opposition PSDB party. The Bovespa index jumped 2.6 percent on
Friday as investors anticipated that survey showing Rousseff's
popularity falling. 
    Among the biggest gainers Monday on the Brazilian bourse,
shares of Prumo Logistica jumped 5.4 percent after
the company said it will lease part of its Port of Acu in the
north of Rio de Janeiro to NFX, a joint-venture with BP Plc
.
 
    
    Key Latin American stock indexes and currencies at 1537 GMT:
     Stock indexes                     daily %    YTD %
                            Latest     change     change
 MSCI Emerging Markets    1000.23      -0.31      0.07
                                                  
 MSCI LatAm               3304.5       -0.26      3.51
                                                  
 Brazil Bovespa           53215.24     0.44       3.32
                                                  
 Mexico IPC               40927.27     -0.1       -4.21
                                                  
 Chile IPSA               3919.5       -0.26      5.96
                                                  
 Chile IGPA               19226.44     -0.18      5.48
                                                  
 Argentina MerVal         6889.94      1.59       27.80
                                                  
 Colombia IGBC            13470.3      -0.04      3.05
                                                  
 Peru IGRA                15629.52     0.37       -0.79
                                                  
 Venezuela IBC            2349.86      -0.63      -14.13
                                                  
                                                  
 Currencies                            daily %    YTD %
                                       change     change
                          Latest                  
 Brazil real              2.2328       -0.69      5.55
                                                  
 Mexico peso              13.0105      0.02       0.15
                                                  
 Chile peso               565.3        -0.35      -6.93
                                                  
 Colombia peso            1923.19      0.00       0.46
 Peru sol                 2.803        0.18       -0.36
                                                  
 Argentina peso           8.0000       0.03       -18.84
 (interbank)                                      
                                                  
 Argentina peso           10.48        0.67       -4.58
 (parallel)                                       
                                                  
 
    

 (Reporting by Bruno Federowski, Priscila Jordao and Walter
Brandimarte Editing by W Simon)
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