* Real weakens to 2.11/dlr as Mantega says FX rate 'reasonable'
* Central bank calls swap auction, props real back to 2.09/dlr
* Markets wonder whether new informal band ceiling at 2.12
By Walter Brandimarte and Natalia Cacioli
RIO DE JANEIRO, Nov 23 The Brazilian real temporarily weakened past the level of 2.1 per dollar on Friday, widely seen as the limit of an informal trading band, but erased all of its losses later as the central bank intervened in the market.
The central bank action came as the real quickly added to losses following comments by Finance Minister Guido Mantega, who told a crowd of business leaders in Sao Paulo that the exchange rate is at a "reasonable though not totally satisfactory level" to support industry.
The apparent tug of war between Mantega and the central bank left investors wondering whether policymakers still uphold an informal trading band of 2.0-2.1 per dollar where the real has been stuck since early July.
"The government is worried about industry, as we can tell by comments from several officials, but then comes the central bank worried about inflation and you have this tug of war," said a trader with a Brazilian bank.
"We can't say, however, that the central bank is defending the level of 2.1 per dollar. It only intervened today because the real was weakening too sharply," he added.
The real gained 0.5 percent to 2.0861 per dollar after the central bank sold about half of the 62,800 traditional swaps it offered in an auction.
Those contracts, which emulate the sale of dollars in the futures market, were apparently sold in an attempt to cancel some reverse currency swaps -- which mimic the purchase of dollars -- that expire in the beginning of December.
The central bank announced the intervention shortly after the real slid more than 0.8 percent to an intraday low of 2.1168 per dollar -- its weakest in 3-1/2 years.
Hinting that some type of intervention was possible, central bank chief Alexandre Tombini had already said on Thursday that the bank was ready to provide liquidity to the foreign exchange market at year-end, when dollars are traditionally more scarce in Brazil.
NEW TRADING RANGE?
The real had been trading weaker than 2.1 per dollar since the beginning of the session, however, as small dollar outflows weighed on a market with thin trading volumes after the Thanksgiving holiday in the United States.
The 2.0-2.1 reais per dollar range, informally imposed by policymakers through a series of market interventions in the past several months, was considered at the same time favorable to Brazilian exporters and not too bad for inflation.
But signs that the government could tolerate a weaker currency to prop up the economy started to emerge early this week, when President Dilma Rousseff said in an interview that the government is "looking for an exchange rate that is not this one, with a devalued dollar and an over-valued real."
A weaker real could help Brazil's manufacturers, which have struggled with an over-valued currency and high input costs. The real has lost 10 percent this year, but remains more than 20 percent stronger than it was at the end of 2008.