November 29, 2012 / 5:31 PM / 5 years ago

EMERGING MARKETS-Brazil real weakens on month-end speculation

* Optimism on U.S. budget deal aids most Latam currencies
    * Dollar-long players seek weaker month-end Brazil real rate
    * Real weakens 0.5 pct, Mexican peso gains 0.1 pct

    By Natalia Cacioli
    SAO PAULO, Nov 29 (Reuters) - The Brazilian real extended
its losses for a second day on Thursday, under pressure by
dollar-heavy investors who wanted to further weaken the currency
until the central bank on Friday sets its Ptax monthly exchange
reference rate.
    Elsewhere in Latin America, currencies gained along with
emerging market stocks. Boosting investors' appetite for risk
was optimism that U.S. leaders could reach a deal to avert steep
spending cuts and tax hikes that could plunge the world's
largest economy in recession next year. 
    "In the United States, they say there are growing chances of
an agreement to avoid the fiscal cliff and that is bring
optimism to the market," said Gloria Soto, a currency trader at
FXCM Chile.
    The Mexican peso and the Chilean peso gained
0.1 percent and 0.3 percent, respectively. In Brazil, however,
the real  lost as much as 1 percent. 
    "The only thing that justifies this currency move is the
fight over the Ptax," said Mario Battistel, manager of the
currency trading desk at Fair brokerage in Sao Paulo. "I don't
see another reason, especially because other (emerging market)
currencies are gaining overseas."
    The Ptax is a benchmark exchange rate for a broad range of
contracts, including foreign loans, trade, and derivatives.    
Dollar-laden speculators may be trying to keep the real weak
through the Ptax fix.
    "The market is long dollars, it looks like some players are
trying to push the Ptax higher," said a trader with a large
domestic bank in Brazil. A higher Ptax means it costs more reais
to buy dollars.
    The real later trimmed some of its losses, trading 0.5
percent weaker at 2.10 per dollar, as investors feared the
central bank could intervene again if the currency continued to
    Last Friday, as the real traded around 2.11 per dollar, the
central band called an auction of traditional currency swaps,
derivative contracts that emulate the sale of dollars in the
futures market. 
    The bank sold about half of the 62,800 swaps offered at the
auction, partly cancelling some reverse swaps that are due to
expire on Dec. 3. Traders now expect the central bank to allow
the remaining reverse swaps to expire in the next few days,
which would curb further currency losses.

    Latin American currencies at 1715 GMT:
 Currencies                         daily %    YTD %
                                     change   change
 Brazil real                2.1020    -0.60   -11.11
 Mexico peso               12.9603     0.07     7.75
 Argentina peso*            6.4100     0.94   -26.21
 Chile peso               479.0000     0.33     8.41
 Colombia peso          1,817.5000     0.32     6.65
 Peru sol                   2.5810     0.15     4.49
 * Argentine peso's rate between                    
0 : 0
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