* Investors see tension between Mantega, Tombini over FX
* Central bank seen winning case for stronger real
* Real could gain to 1.95/dlr without cenbank resistance
By Walter Brandimarte
RIO DE JANEIRO, Feb 1 (Reuters) - When Brazil's central bank intervened on Wednesday to halt a currency sell-off triggered by comments from Finance Minister Guido Mantega, many investors wondered who is really in charge of Brazil's foreign exchange policy.
It was the second time in about two months that Mantega and central bank chief Alexandre Tombini appeared to clash publicly over the appropriate level for the real - a debate that has been growing as Brazil's economic recovery has faltered and inflation has stayed above target.
Both episodes, if not evidence of conflict among Brazilian policymakers, are seen at the least as being an example of the sort of seemingly contradictory policy action that has worried investors and put a chill on Brazil's business climate.
On Wednesday, just one day after the real had gained past 2 per dollar for the first time in seven months, Mantega warned the government was ready to correct any "excess" in the exchange rate and that a "speculative appreciation" of the real would not be tolerated.
His comments brought the currency back to the 2-per-dollar mark, but the change was erased minutes later when the central bank announced it was rolling over $1.2 billion in dollar repurchase agreements that would expire two days later.
When the real traded at around 2.10 per dollar on Nov. 23, Mantega told a crowd of business leaders in Sao Paulo that the exchange rate was at a "reasonable though not totally satisfactory level" to support industry. He added that a real weaker than 2 per dollar "was here to stay".
In moves similar to this week's action, the currency fell on Mantega's comments only to be rescued minutes later by the central bank, whose recent interventions are seen by analysts as a sign of growing inflation concerns.
"Uncertainty rules now," Ilan Solot, a London-based emerging markets currency strategist at Brown Brothers Harriman, said of Brazil's foreign exchange policy.
Like many analysts, Solot said it is tough to say whether the central bank was deliberately offsetting Mantega's comments or if the timing of its interventions was a mere coincidence.
Solot said, though, that it appears that Tombini is taking the reins of Brazil's foreign exchange policy with the blessing of President Dilma Rousseff, herself a trained economist who likes to have a say in key economic decisions.
"My interpretation is that there are two different lines of economic thinking (in the government). And the central bank's thinking is gaining precedence over the finance ministry's thinking," he said.
In Brasilia, a finance ministry source said there was no conflict between Mantega's Wednesday speech and the central bank's action. "There was no contradiction. The central bank just did a (dollar line) rollover."
Citi strategists Kenneth Lam and Douglas Comin disagree.
"The central bank and the ministry of finance do not necessarily see eye to eye on the issue of FX," they wrote in a research note. "The central bank has won the battle of the day in convincing the government to let the real appreciate to ease inflation."
The central bank declined to comment.
Brazil's central bank and finance ministry had a long history of disagreement over economic themes such as the right level for interest rates and the currency during the eight years of President Luiz Inacio Lula da Silva's government.
While Mantega was a voice in the chorus of discontent with Brazil's double-digit interest rates, the central bank, led by its former president Henrique Meirelles, carried out an orthodox policy of high interest rates and a relatively free-floating exchange rate to keep inflation at bay.
Under Rousseff and Tombini, however, the bank lowered the base Selic rate to a record low of 7.25 percent while allowing the real to devalue by nearly 30 percent in the period between July 2011 and last November. Both actions were part of a coordinated government action to boost economic activity.
But a persistent rise in inflation, combined with a still anemic economic recovery, seems to have magnified lingering tensions between the two institutions, with the central bank now pushing for a stronger real.
To be sure, the finance ministry has also been unwinding some of the measures taken early last year to curb dollar inflows, helping the real gain about 7 percent in value since the end of November.
On Wednesday, Mantega stressed that recent currency gains do not mean the government is changing its foreign exchange policy nor was it trying to use the exchange rate to curb inflation.
Instead, according to another source at the finance ministry, a stronger real is part of a strategy to cheapen imported capital goods and boost much-needed investment in industry - an explanation that can certainly be more easily digested by the exporters Mantega had pledged to protect with a weaker currency.
Market analysts, however, are not totally convinced.
"The central bank wants the currency to help as a cushion against inflation," said Bruno Eiras Martins, a trader at Banco Daycoval in Sao Paulo.
"Some are saying that a stronger real is an instrument to boost imports of capital goods and investment, but I'm not sure about that. I believe that, given rising inflation concerns, the central bank has adjusted its strategy."
While economists agree that a moderate currency appreciation would not make a substantial dent on inflation, the fact that the real pierced the mark of 2 per dollar earlier this week should at least help anchor inflation expectations.
For now, most analysts agree, the central bank should offer no resistance to a real as strong as 1.95 per dollar, as long as the appreciation is gradual.