EMERGING MARKETS-Brazil real surges to new high despite new tax

* Brazil may allow more currency gains to curb inflation

* Chile’s peso firms on copper, rate hike bets

* Peru sol jumps on bets Humala to lose second round vote

* Brazil real up 1.9 pct, Mexico peso 0.21 pct

By Michael O’Boyle and Luciana Lopez

MEXICO CITY/SAO PAULO, April 7 (Reuters) – Brazil’s real
surged on Thursday on bets Brazilian policymakers would allow
more currency gains in order to offset inflation pressures,
with some eyeing room for a jump further to 1.50 per dollar.

The real had its biggest jump since June 2010 as it rose to
its strongest against the dollar since August 2008.

Brazil announced a minor tax increase on foreign borrowing
on Wednesday to try to halt the real’s appreciation, but the
measure was far less drastic than many had feared. For more,

Brazil has tried a variety of measures to slow the real’s
gains, with limited success. More severe capital controls could
push investors out of Brazil, while further currency strength
could help contain the impact of rising commodity prices.

“The government appears to have decided to allow the
currency to appreciate a bit more and see how beneficial for
inflation expectations it could actually be,” said Marcelo
Salomon, chief economist for Brazil at Barclays Capital in New

Data showed consumer prices in Brazil rose more expected in
March, pushing the annual inflation rate near the top of a
government ceiling. [ID:nN07268340]

The real (BRBY: Quote, Profile, Research) bid nearly 1.9 percent stronger to 1.582
per dollar.

Finance Minister Guido Mantega announced another press
conference at 6:30 p.m. local time (2130 GMT) on Thursday,
raising some concerns further measures could be introduced.


Miriam Tavares, currency director at brokerage AGK
Corretora in Sao Paulo, said the real would likely trade
between 1.55 and 1.60 per dollar in the coming session.

Analysts at RBS Securities and Barclays Capital both see
the real firming to as strong as 1.50 per dollar.

Low interest rates in major developed economies like the
United States and Japan will keep up the allure of Brazil’s
double-digit debt yields, while higher prices for commodities,
like Brazil’s key exports of soybeans and iron, will further
back Latin American currencies, analysts said.

“You see commodity prices moving up, and you will see more
flows into Brazil,” Salomon added.

Still, a widening current account deficit and expectations
the U.S. central bank will eventually start to withdraw
liquidity could cause Brazil’s real to weaken slightly over the
next year, a Reuters poll showed. [ID:nN06201367]

Mexico’s peso managed to stake out a 2-1/2 year intraday
high, at 11.7615 per dollar, before paring back. The currency
is supported by expectations an improving U.S. economy will
boost demand for local exports.

Mexico sends around 80 percent of its exports to its
northern neighbor. While Mexico is expected to keep interest
rates on hold for at least most of this year, investors are
still drawn to yields that are higher than in developed

The Mexican peso (MXN=: Quote, Profile, Research) firmed 0.21 percent to 11.7750 per

Chile’s peso (CLP=CL: Quote, Profile, Research) bid 0.38 percent firmer at 471.90 per
dollar, its strongest in six weeks, supported by a rebound in
prices for copper, the country’s main export. [ID:nLDE7360VP]

Also backing bets for an aggressive interest rate hike this
month, the central bank’s president said on Thursday that
Chile’s economy will grow close to its full capacity this year.

Peru’s sol (PEN=PE: Quote, Profile, Research) bid up 0.43 percent to 2.8010 per U.S.
dollar on Thursday on news that a poll showed right-wing
populist Keiko Fujimori would face left-wing nationalist
Ollanta Humala in a June 5 run-off. [ID:nN07122940]

The first-round vote will be held on Sunday. The sol has
weakened in recent weeks on worries about a Humala victory.
(Additonal reporting by Silvio Cascione in Sao Paulo, Foilan
Romero in Santiago, and Ursula Scollo; Editing by Dan Grebler)

EMERGING MARKETS-Brazil real surges to new high despite new tax