EMERGING MARKETS-Brazil's real whipsaws as investors test trading band
By Asher Levine SAO PAULO, Aug 8 (Reuters) - Brazil's currency, the real , fluctuated near its weakest level in over four months on Friday after weaker-than-expected inflation data encouraged investors to test the central bank's willingness to protect an informal trading band. Other currencies in the region were mixed while stocks fell, with the MSCI Latin American stock index posting its biggest loss in over a week. Data on Friday showed Brazil's consumer prices barely rose in July, leading some investors to reduce bets on the pace of interest rate hikes in 2015. The inflation print drove a slight drop on the short end of the curve for Brazilian interest rate futures <0#DIJ:>, adding downward pressure to the real. That movement may be short-lived however, said Silvio Campos Neto, an economist with consulting firm Tendencias in Sao Paulo. "Despite the unfavorable global outlook, the relief is small, because the market is maintaining its perspective that inflation will rise again next year," he said. Traders said the real was also responding to lower risk appetite after U.S. President Barack Obama authorized targeted air strikes in Iraq on Thursday. The real hovered near the 2.30 per dollar level, at the top of what some investors see as an informal trading band of 2.25 to 2.30 reais being enforced by the central bank though market interventions. "As long as the bank doesn't offer any signal that it is present, the market will continue to test (the band)," said one trader who declined to be named because he is not authorized to speak to the press. The Chilean peso strengthened about 0.2 percent as bargain-hunters stepped in after the currency closed at its weakest level in over five years on Thursday. Inflation in Chile reached 4.5 percent annually in July, government data showed on Friday, within market expectations. In equity markets, Brazil's Bovespa stock index dropped for the third day in four, on track for its second straight weekly loss. Most of the index's losses were driven by a nearly 4 percent fall in state-run oil producer Petroleo Brasileiro SA after an electoral poll showed a tighter race between President Dilma Rousseff and her rivals ahead of October's election. Many investors see a Rousseff defeat as a potential boon to the company, known as Petrobras. Key Latin American stock indexes and currencies at 1530 GMT: Stock indexes daily % YTD % Latest change change MSCI Emerging Markets 1045.66 -0.53 4.84 MSCI LatAm 3366.66 -1.29 6.56 Brazil Bovespa 55509.92 -1.21 7.77 Mexico IPC 43961.82 -0.35 2.89 Chile IPSA 3884.73 -0.56 5.02 Chile IGPA 18964.65 -0.47 4.05 Argentina MerVal 8221.56 -0.24 52.50 Colombia IGBC 14120.74 -0.59 8.03 Peru IGRA 16905.24 0.26 7.31 Venezuela IBC 2131.24 -0.81 -22.12 Currencies daily % YTD % change change Latest Brazil real 2.2940 0.06 2.74 Mexico peso 13.2284 0.39 -1.50 Chile peso 575.8 0.21 -8.63 Colombia peso 1889.59 -0.19 2.24 Peru sol 2.801 0.43 -0.29 Argentina peso (interbank) 8.2700 0.00 -21.49 Argentina peso (parallel) 12.77 0.55 -21.69 (Additinal reporting by Bruno Federowski; Editing by W Simon)
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