EMERGING MARKETS-Brazil real slides as central bank acts to stem rally
By Bruno Federowski SAO PAULO, July 1 (Reuters) - The Brazilian real weakened on Friday as the central bank stepped in to stem a rally in the currency, underperforming its regional peers after Mexico's central bank aggressively raised its key interest rate. Brazil's real declined 0.9 percent after posting its biggest monthly gain in 13 years in June, supported by a rebound in global investor sentiment. Questions over new central bank chief Ilan Goldfajn's tolerance of a stronger currency grew, as optimism over economic prospects under interim President Michel Temer drove the real to its strongest levels in a year. The central bank reacted by selling $500 million in reverse currency swaps on Friday, which correspond to future dollar purchases. The bank had refrained from intervening since Goldfajn took charge last month. Previous central bank chief Alexandre Tombini had used reverse currency swaps to sharply reduce the central bank's exposure to currency movements. Many traders believed he also meant to shield exports from further strength in the real. In an interview with local news agency Valor PRO on Friday, Goldfajn said he saw a window of opportunity to reduce the central bank's exposure and will continue doing so as long as it remains open, slamming the real to its session lows, traders said. "It does not look like they have a specific level for the currency in mind ... It seems the central bank means to reduce its FX exposure as well as limit excesses in currency markets," H.Commcor analysts wrote in a client note. In Brazil's stock markets, shares of Kroton Educacional SA and Estácio Participações SA rose after Estácio accepted an improved takeover bid from Kroton. The country's benchmark stock index rose 1 percent, but gains were limited by a drop in shares of JBS SA following erroneous media reports that Brazilian police had raided the offices of world's largest meatpacker. Eldorado Celulose, which is also controlled by the billionaire Batista family, later said it was the target of the police raids - in the latest stage of the country's biggest-ever corruption investigation. Mexico's peso was nearly flat after the country's central bank raised its key interest rate more than expected on Thursday to calm concerns that currency weakness could boost inflation. The peso strengthened 1.1 percent on Thursday following the central bank's decision. Key Latin American stock indexes and currencies at 1500 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 838.69 0.55 5.03 MSCI LatAm 2278.85 0.42 24.02 Brazil Bovespa 52080.98 1.08 20.14 Mexico IPC 46129.70 0.36 7.33 Chile IPSA 4017.02 0.53 9.15 Chile IGPA 19816.07 0.46 9.17 Argentina MerVal 14995.53 2.12 28.44 Colombia IGBC 9782.11 0.2 14.45 Venezuela IBC 12579.57 -2.11 -13.77 Currencies daily % YTD % change change Latest Brazil real 3.2412 -0.88 21.78 Mexico peso 18.2900 -0.08 -5.80 Chile peso 659.9 0.47 7.55 Colombia peso 2918.97 0.01 8.58 Peru sol 3.287 -0.12 3.86 Argentina peso (interbank) 15.1100 -0.40 -14.08 Argentina peso (parallel) 14.97 -0.20 -4.68 (Reporting by Bruno Federowski; Editing by Tom Brown)
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