September 12, 2012 / 4:25 PM / 5 years ago

EMERGING MARKETS-Brazil real weakens as cenbank defends currency

* Brazilian cenbank sells $1.37 bln in reverse currency
swaps
    * Real had gained in previous sessions on ECB, Fed optimism
    * Mexico's peso down 0.3 pct, real falls 0.2 pct

    By Anna  Irrera 
    RIO DE JANEIRO, Sept 12 (Reuters) - The Brazilian real
  weakened o n W ednesday after the country's central
bank intervened to halt four sessions of gains that drove the
currency near an informal floor of 2 reais per dollar.
    The bank sold $1.37 billion in reverse currency swaps as
part of its efforts to curb the real's gains, which had been
spurred in previous sessions by optimism about additional
monetary stimulus from the European Central Bank and the U.S.
Federal Reserve. 
    On Wednesday, the likelihood of further gains increased
after Germany's Constitutional Court approved the euro zone's
new bailout fund.  
    The court's green light was a key requirement for the ECB's
new plan to buy bonds of struggling euro members. The ruling
restored hopes for a recovery of the region's economy, lifting
global stock prices. 
    The real weakened 0.2 pct to 2.0194 per dollar after the
auction, however.
    João Medeiros, a partner at Pioneer Corretora de Cambio
Ltda, a brokerage firm in Sao Paulo, said the Central bank
reacted to the news from Germany. 
    "The bank is showing through its auction what we already
knew, which is that we no longer have a floating currency," said
Medeiros. "The market is managed by the central bank."   
    Since early June the government has kept the real locked
within the range of 2.0-2.1 per dollar, a level it considers
ideal to boost the competitiveness of the country's exporters
without stoking inflation. Yet, the real traded as low as 2.0141
per dollar on Tuesday.
    Elsewhere in Latin America, currencies traded mixed. 
    The Mexican peso weakened 0.3 percent to 13.0348 per
dollar, as positive news from Europe failed to  boost appetite
for the country's currency further. 
    "The market had already embedded all of the gains that would
have come with the German ruling and that is why we are seeing a
bit of selling," said Enrique Alvarez, head of research for
Latin America at IDEAglobal in New York. 
    Chile's peso strengthened 0.1 percent and the
Colombian peso weakened 0.3 percent. 

    Latin American FX prices at 1534 GMT:
 Currencies                             daily %     YTD %
                                         change    change
                               Latest            
 Brazil real                   2.0194     -0.20     -7.47
                                                 
 Mexico peso                  13.0348     -0.31      7.17
                                                 
 Argentina peso*               6.3000      0.00    -24.92
                                                 
 Chile peso                  473.7000     0.106      9.63
                                                 
 Colombia peso             1,802.1000     -0.31      7.56
                                                 
 Peru sol                      2.6040      0.04      3.57
                                                 
 * Argentine peso's rate between                         
 brokerages

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