Brazil's currency had its biggest drop in six months after the central bank sold reais for dollars in a bid to bolster foreign reserves. Chile's peso followed the decline.

The bank's currency sales signal it plans to keep the real from strengthening beyond 2.7 to the dollar to help spur exports, said Flavio Datz, a trader at Rio de Janeiro-based Agora Senior, Brazil's largest securities brokerage.

"The intervention is showing a floor for the market," Datz said in a telephone interview from Sao Paulo. "The central bank is showing that it would take a lot of dollar inflows to strengthen the currency beyond 2.7 per dollar".

The real tumbled 1.4 percent to 2.7560 reais per dollar at 5 p.m. New York time after the central bank sold reais at a maximum rate of 2.722. At 4 p.m. in Sao Paulo, when most trading in Brazil ends, the real was at 2.7465. The real has surged 17 percent since May 20, cutting into revenue for exporters that have led the country's economic recovery.

Brazilian President Luiz Inacio Lula da Silva said in an interview in Brasilia on Nov. 23 that the nation's currency needs to weaken to bolster exports and help the economy expand for a second year. Lula said the economy would benefit from an exchange rate between 2.9 and 3.1 reais per dollar.

(From Bloomberg, Dezembro 08, 2004)

__________