EMERGING MARKETS-Brazil real drops as central bank ends intervention

RIO DE JANEIRO, March 25 (Reuters) - The Brazilian real

dropped more than 1 percent on Wednesday after the central bank

announced it will end its forex intervention program at the end

of March, reducing artificial support for one of the world's

worst performing currencies.

The decision, in line with a broader government effort to

reduce intervention in the economy, did not have an even bigger

impact on the real because central bank President Alexandre

Tombini had already signaled the program could not be extended

past March 31.

The real lost 1.4 percent to 3.17 per dollar while

other key Latin American currencies such as the Mexican peso

and the Chilean peso were steady or slightly

stronger.

Expectation that the central bank would scrap its currency

intervention program, combined with a growing economic and

political crisis in Brazil and fears of higher U.S. interest

rates, have driven the real nearly 16 percent lower this year.

In March alone, it has tumbled nearly 19 percent, which

makes it the worst performer among the 152 currencies tracked by

Reuters.

The real had been kept largely over valued during the past

few years as President Dilma Rousseff resorted to a number of

unconventional policies to fight inflation. Since re-election to

a second term in office starting this year, however, she has

been trying to chance course.

Economists welcomed the end of the currency intervention

program, which they said not only created economic distortions

but had also become increasingly ineffective and expensive.

"A very welcome move and a step forward to facilitate the

needed macroeconomic adjustment," Goldman Sachs (NYSE: GS-PB - news) ' senior

economist Alberto Ramos said in a note to clients. "In our

assessment, the central bank has intervened excessively in the

forex market over the last 19 months."

Under the program, the central bank offered investors a

daily supply of currency swaps, derivatives that provide

protection against currency losses.

The stock of those swaps currently stands at around $113

billion - an amount the central bank considers enough to meet

investors' demand for hedging. The bank said it will fully roll

over swaps that mature on April 1 and beyond.

Key Latin American stock indexes and currencies at 1630 GMT

Stock indexes daily % YTD %

change change

Latest

MSCI Emerging 975.73 -0.26 2.29

Markets

MSCI LatAm 2484.19 -0.47 -8.49

Brazil Bovespa 51595.4 0.17 3.18

Mexico IPC 43721.36 -0.75 1.33

Chile IPSA 3890.87 -0.12 1.04

Chile IGPA 18982.33 -0.01 0.59

Argentina MerVal 11154.55 -2.02 30.02

Colombia IGBC 9960.3 1.12 -14.39

Peru IGRA 12509.75 -0.09 -15.44

Venezuela IBC 5014.06 4.54 29.94

Currencies daily % YTD %

change change

Latest

Brazil real 3.1693 -1.40 -16.15

Mexico peso 14.965 -0.15 -1.48

Chile peso 619.8 0.23 -2.16

Colombia peso 2551 -1.57 -6.39

Peru sol 3.064 0.07 -2.77

Argentina peso 8.8000 -0.03 -2.84

(interbank)

Argentina peso 12.78 0.31 9.55

(parallel)

(Reporting by Bruno Federowski and Walter Brandimarte; Editing

by Grant McCool)