* Real could strengthen as long as movement is gradual
* Investors expected Brazil to stop real from gaining past
* Stronger real helps, or doesn't hurt, fight against
By Patricia Duarte
SAO PAULO, Feb 14 Brazilian policymakers are
more worried about curbing volatility in the foreign exchange
market rather than setting a trading range for the real, a
source on President Dilma Rousseff's economic team said on
The source, who spoke on condition of anonymity, signaled
that the real could strengthen past the level of 1.95 per dollar
- considered by many investors as the lower limit of a new
trading band imposed by the central bank - as long as the
appreciation is gradual.
The real gained 0.3 percent on Thursday to
1.9575 per dollar, its strongest level in nine months, as
investors tested what many analysts believe to be the lower
limit of a new informal trading band of 1.95 to around 2 reais
The boundaries of that trading range appeared to have been
set by a series of recent central bank interventions, including
a Friday sale of reverse currency swaps - derivative contracts
designed to weaken the currency that were offered when the real
neared the mark of 1.95 per dollar.
Asked whether the government was using the exchange rate to
cheapen the price of imported goods and help curb inflation, the
source answered that a "stronger real tends to help (the fight
against inflation), or at least it doesn't hurt."
The source reaffirmed the government's long-standing
position that there is no official trading band for the real. At
the same time, the source said policymakers foresee the exchange
rate to remain more stable in 2013 than last year.
Between March and November of 2012, the real weakened as
much as 20 percent against the U.S. dollar - a move that was
initially encouraged by the government to stimulate exports but
that ended up adding to inflation.
"The impact (on prices) is more limited when exchange rate
variations are gradual," noted the source.