December 16, 2014 / 4:20 PM / 5 years ago

EMERGING MARKETS-Brazil's currency plunges as oil, ruble spook investors

(Adds trader comment, Tombini comments, updates prices)
    SAO PAULO, Dec 16 (Reuters) - Brazil's currency fell sharply
on Tuesday as diving oil prices, a plunge in the Russian ruble,
and uncertainty over the central bank's currency-intervention
program drove investors toward safe-haven assets. 
    The Brazilian real fell as low as 2.76 per dollar,
near its weakest in 10 years. 
    The country's Bovespa stock index pared early losses
as bargain-hunting helped Petrobras shares recover from an early
    Brent crude fell more than $1 per barrel on Tuesday
to below $60 for the first time since July 2009 as concern over
a global supply glut continued to thrash prices.
    Russia said on Tuesday it would not cut oil output to help
prop up prices and refrained from calling on OPEC to do so even
though its economy was showing signs of severe
    The ruble tumbled nearly 10 percent for the second day on
Tuesday, with confidence in the central bank evaporating after
an ineffectual overnight rate hike. 
    Brazil's real, which has weakened nearly 6 percent this
month on uncertainty over the future of the central bank's
currency-intervention program and the outlook for U.S. interest
rates, extended its losses into a fifth session.
    Concerns over the intervention program continued to fuel
caution after central bank chief Alexandre Tombini offered only
vague details on how the program would be changed next year. In
a Tuesday speech, Tombini said the central bank could reduce the
daily supply of currency swaps to as little as $50 million or
leave it unchanged at $200 million.
    The intervention program offers hedging protection to local
businesses and helps support the real by acting as the
equivalent of future dollar sales.
    "Even if things were calm abroad, the dollar would probably
continue strengthening against the real," said a trader who
asked not to be identified because he is not authorized to speak
to the media. "The market is not going to rest easy until it
knows what is going to happen with the (intervention) program
next year." 
    Yields on Brazilian interest rate futures <0#DIJ:> shot
higher, with investors betting on bigger rate hikes in the
future to help contain inflationary pressure from the weaker
    The Bovespa stock index opened with a decline of
more than 2 percent, though it returned part of the losses
shortly after.
    Preferred shares of Brazil's state-run oil producer,
Petroleo Brasileiro SA, were volatile following a
six-day slump as investors pounced on cheap prices. The stock is
down 43 percent this year, hurt by both an ongoing corruption
investigation at the company and the decline in oil prices. 

    Key Latin American stock indexes and currencies at 1600 GMT:
  Stock indexes                        daily %    YTD %
                            Latest     change     change
 MSCI Emerging Markets    910.04       -1.52      -7.84
 MSCI LatAm               2,484.59     -1.94      -20.84
 Brazil Bovespa           46,802.47    -0.46      -9.13
 Mexico IPC               39,840.91    -1.22      -6.75
 Chile IPSA               3,725.90     -0.72      0.72
 Chile IGPA               18,349.51    -0.62      0.67
 Argentina MerVal         7,568.51     -0.17      40.39
 Colombia IGBC            10,272.56    0.09       -21.41
 Peru IGRA                14,347.34    -0.52      -8.93
 Venezuela IBC            3,825.26     1.94       39.78
 Currencies                            daily %    YTD %
                                       change     change
 Brazil real              2.7491       -2.19      -14.27
 Mexico peso              14.7940      -0.23      -11.92
 Chile peso               621.5000     -0.34      -15.35
 Colombia peso            2449.5000    -0.94      -21.13
 Peru sol                 2.9690       -0.13      -5.93
 Argentina peso           8.5500       0.03       -24.06
 Argentina peso           13.1000      0.53       -23.66


 (Reporting by Brono Federowski and Asher Levine; Editing by
Jeffrey Benkoe; and Peter Galloway)
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