January 17, 2017 / 2:14 PM / a year ago

EMERGING MARKETS-Brazil real strengthens as central bank resumes intervention

By Bruno Federowski
    SAO PAULO, Jan 17 (Reuters) - The Brazilian real
strengthened on Tuesday as the central bank resumed market
intervention after standing pat for a month.
    The central bank sold $600 million worth of traditional
currency swaps, which function like dollar sales for future
delivery to investors, to roll over February maturities.
    The bank had refrained from intervening since Dec. 12 as the
currency consolidated near 3.2 to the dollar. The real 
firmed 0.76 percent to 3.21 on Tuesday after slipping 2 percent
in the two previous trading days.
    The central bank currently holds $26.6 billion worth of
swaps on its balance sheet, with $6.4 billion maturing next
    Brazil's central bank is the latest in Latin America to
spring into action after uncertainty over U.S. President-elect
Donald Trump's policies triggered a rash of currency volatility.
    The Mexican central bank twice sold dollars to curb the
peso's decline this year. The peso firmed 0.7 percent
on Tuesday but remained near the all-time low set last week. 
    Yields paid on Brazilian interest rate futures <0#2DIJ:>
narrowed as traders increased bets that the central bank will
cut interest rates by an additional 75 basis points next month.
    According to the minutes of the central bank's last policy
meeting, when it reduced the benchmark Selic rate by a
larger-than-expected 75 basis points, a more ample supply of
money will help the economy recover without hurting a decline in
    Key Latin American stock indexes and currencies at 1330 GMT:
 Stock indexes                                daily %    YTD %
                                               change   change
 MSCI Emerging Markets                895.31      0.7     3.11
 MSCI LatAm                          2421.34      0.3     3.14
 Brazil Bovespa                     63728.31    -0.16     5.81
 Chile IPSA                          4223.70     0.03     1.74
 Chile IGPA                         21065.57     0.03     1.60
 Venezuela IBC                      30559.91    -3.57    -3.61
 Currencies                                   daily %    YTD %
                                               change   change
 Brazil real                          3.2125     0.76     1.14
 Mexico peso                         21.5750     0.73    -3.85
 Chile peso                            659.6     0.38     1.68
 Colombia peso                        2919.3     0.63     2.82
 Argentina peso (interbank)          15.8700     0.19     0.03
 Argentina peso (parallel)             16.76     0.18     0.36

 (Reporting by Bruno Federowski; Editing by Lisa Von Ahn)
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