EMERGING MARKETS-Brazil's real drops after central bank reduces support
SAO PAULO, June 11 (Reuters) - The Brazilian real sank on Thursday after the central bank slowed the rollover pace of expiring currency swaps, signaling its discomfort with the real's recent gains. Other Latin American currencies were largely unchanged, while equities markets moved slightly higher. Brazil's central bank said late on Wednesday it will auction as many as 6,300 currency swaps to roll over similar contracts that mature on July 1, down from a previous pace of 7,000 contracts per day. Currency swaps are derivatives that support the real by providing investors with protection against currency losses. The real had gained about 2 percent in the month through Wednesday, with investors encouraged by higher commodities prices and views that a recent dollar rally was overdone. The central bank also released the minutes of its last rate-setting meeting before the market open on Thursday, in which it signaled concerns over the likelihood of lowering inflation back to the 4.5 percent official target by the end of 2016. "It seems that despite the very challenging inflation picture the authorities do not want to fall in the old trap of using the real as an instrument to control inflation," wrote Alberto Ramos, chief Latin America economist with Goldman Sachs in New York. "It seems that they are increasingly looking at the real as an instrument to help the economy and facilitate the needed macro adjustment." Investors responded by driving up yields on Brazilian interest rate futures <0#DIJ:> across the curve on the outlook for a higher benchmark Selic rate. Brazil's Bovespa stock index edged higher, adding to Wednesday's 2 percent gain, led by shares of lenders and commodities exporters. Key Latin American stock indexes and currencies at 1308 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 977,03 -0,08 2,25 MSCI LatAm 2533,92 -0,82 -6,33 Brazil Bovespa 54210,21 0,62 8,40 Mexico IPC - - - Chile IPSA 3960,52 0,11 2,85 Chile IGPA 19290,21 0,1 2,22 Argentina MerVal 0 0 -100,00 Colombia IGBC 10313,02 0 -11,36 Peru IGRA - - - Venezuela IBC 0 0 -100,00 Currencies daily % YTD % change change Latest Brazil real 3,1503 -1,15 -15,64 Mexico peso 15,487 -0,33 -4,80 Chile peso 632 -0,20 -4,05 Colombia peso 2530 -0,16 -5,61 Peru sol 3,1541 0,00 -5,55 Argentina peso 9,0275 -0,03 -5,29 (interbank) Argentina peso 12,57 0,40 11,38 (parallel) (Reporting by Asher Levine; Editing by Paul Simao)
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