November 21, 2012 / 12:00 PM / in 5 years

EMERGING MARKETS-Brazil real weakens further, intervention eyed

RIO DE JANEIRO, Nov 21 (Reuters) - The Brazilian real opened weaker as global risk aversion grew on Wednesday, with investors likely to test the central bank’s willingness to intervene in the currency market to halt the currency’s depreciation.

The real weakened 0.6 percent to 2.0927 per dollar, nearing the ceiling of a narrow trading range of 2.0-2.1 per greenback set by the central bank since July.

“Our view is unchanged: we still see the real to test the 2.10 (level) soon,” Citigroup strategists wrote in a research note.

Brazilian policymakers have favored a real weaker than 2 per dollar in order to support the country’s industry. At the same time, a much weaker currency could further spur inflation, which is already running above the center of a government target range.

In the past several months, the central bank has resorted to a series of traditional and reverse currency swap auctions -- which emulate, respectively, the sale and the purchase of dollars in the futures market -- to keep the currency within the 2.0-2.1 reais per dollar range.

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