December 2, 2016 / 2:17 PM / 2 years ago

EMERGING MARKETS-Brazil real seesaws as cenbank offsets political risk

By Bruno Federowski
    SAO PAULO, Dec 2 (Reuters) - The Brazilian real seesawed on
Friday as increased central bank intervention partially offset
local political concerns.
    The real was nearly flat after weakening more than
2.3 percent on Thursday amid fears that friction between
lawmakers and prosecutors could increase political instability
and delay the approval of austerity measures.
    The central bank reacted by announcing after the market
close on Thursday an auction of currency swaps, which function
like selling dollars to investors for future delivery, to roll
over January maturities.
    The bank rolled over all of the $6.5 billion worth of swaps
maturing in December as foreign exchange volatility spiked
following the election of Donald Trump to the White House.
    It had refrained from rolling over any of the swaps that
matured between May and November, seeking to reduce its costly
exposure to the swaps, currently at $26.5 billion.
    Speculation that the central bank had contacted traders to
test the demand for further interventions briefly lifted the
real mid-morning. Two traders at primary dealer institutions
denied those rumors.
    Other Latin American currencies treaded water after
stronger-than-expected U.S. jobs data. The figures lifted
appetite for risky assets but gains were limited by the prospect
of higher U.S. rates as the economy recovers. 
    Brazil's benchmark Bovespa stock index fell 1.1
percent weighed down by local political woes. 
    Shares in petrochemical company Braskem SA were
among the few gainers, rising the most in more than two months.
    Braskem, the largest petrochemical producer in Latin
America, said it is close to reaching a leniency deal with U.S.
and Brazilian officials related to a sweeping graft probe.
    Other emerging market currencies were mixed after
manufacturing data from major developing economies painted a
divergent picture while the prospect of rising oil prices and a
weaker dollar provided some support.
    Key Latin American stock indexes and currencies at 1355 GMT:
 Stock indexes                                 daily    YTD %
                                                   %   change
                                   Latest     change  
 MSCI Emerging Markets                850.56   -0.91     8.09
 MSCI LatAm                          2217.31   -0.66    21.99
 Brazil Bovespa                     58835.70   -1.13    35.72
 Chile IPSA                          4190.45   -0.17    13.86
 Chile IGPA                         20942.45   -0.14    15.38
 Venezuela IBC                      35777.75   -1.49   145.25
 Currencies                                    daily    YTD %
                                                   %   change
                                      Latest  change  
 Brazil real                          3.4650    0.06    13.91
 Mexico peso                         20.7575    0.12   -16.99
 Chile peso                            673.9    0.09     5.31
 Colombia peso                          3080   -0.23     2.90
 Peru sol                              3.411    0.09     0.09
 Argentina peso (interbank)          15.8400    0.09   -18.04
 Argentina peso (parallel)              16.2   -0.31   -11.91
 (Reporting by Bruno Federowski; Editing by Daniel Flynn and
Bill Trott)
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