June 3, 2014 / 5:15 PM / 4 years ago

EMERGING MARKETS-Brazil real stems losses as cenbank ups swap offer

SAO PAULO, June 3 (Reuters) - Brazil's currency, the real,
stemmed the previous session's losses on Tuesday after the
central bank upped the amount of currency swaps auctioned to
roll over expiring contracts.
    Other Latin American currencies were mixed, while the
region's stocks posted modest gains.
    Brazil's real had fallen sharply on Monday, dropping 1.57
percent to 2.275 per dollar, after the central bank rolled over
fewer expiring swaps than it had in previous sessions. Investors
had taken the change as a signal that the bank would cut the
pace of rollover auctions going forward.
    The bank did an about-face on Tuesday, doubling the number
of swaps offered to 10,000. The swaps are used by investors who
wish to hedge themselves against a possible weakening of the
    The real initially strengthened on Tuesday though pared
gains to trade little-changed in the afternoon. Uncertainty over
the pace of the swap program, which is slated to last at least
until the end of the month, has left investors without a clear
view of the currency's direction.
    "Today the currency won't return all its losses from
yesterday because it's still up in the air whether (the central
bank) will extend this rollover rhythm through the month," said
Camila Abdelmalack, an economist with CM Capital Markets in Sao
    At its current level, the real remains above what many
traders had considered an informal trading band of 2.20 reais to
2.25 reais per dollar being enforced by the central bank through
currency interventions. 
    "The central bank is much more interested in containing
volatility than targeting a particular level in spot," wrote
Citi analyst Kenneth Lam in an investor note.
    Latin American stocks were mostly higher, boosted by
encouraging Purchasing Managers' Index data from key regional
trade partner China. 
    Brazil's Bovespa stock index rose for the second
straight day, though gains were limited by a 2 percent drop in
meatpacker JBS SA after the company's U.S.-based
Pilgrim's Pride Corp unit upped its offer to purchase
processed foods maker Hillshire Brands Co.
    The Bovespa notched its biggest net inflow of foreign funds
in nearly 30 months in May, exchange operator BM&FBovespa SA
 said on Tuesday. Analysts have attributed the inflows
to encouraging corporate earnings and investor optimism over an
improvement in economic policy following October's presidential
    Key Latin American stock indexes and currencies at 1646 GMT:
 Stock indexes               Latest        daily %     YTD %
                                            change    change
 MSCI Emerging Markets           1034.54      0.49      2.67
 MSCI LatAm                      3249.09      0.18      1.33
 Brazil Bovespa                 51850.76      0.47      0.67
 Mexico IPC                     41982.61      0.11     -1.74
 Chile IPSA                      3908.83      0.45      5.67
 Chile IGPA                     19095.71      0.35      4.77
 Argentina MerVal                7739.01      0.79     43.55
 Colombia IGBC                  13765.44      0.75      5.31
 Peru IGRA                      15771.25       0.2      0.11
 Venezuela IBC                   2170.75      0.64    -20.68
 Currencies                                daily %     YTD %
                                            change    change
 Brazil real                      2.2746      0.02      3.61
 Mexico peso                      12.944     -0.24      0.66
 Chile peso                        549.7      0.42     -4.29
 Colombia peso                   1898.69      0.15      1.75
 Peru sol                          2.778     -0.07      0.54
 Argentina peso (interbank)       8.0900     -0.06    -19.75
 Argentina peso (parallel)         11.56     -0.69    -13.49
 (Reporting by Tiago Pariz, Priscila Jordao and Asher Levine;
Editing by Nick Zieminski)
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