By Bruno Federowski BRASILIA, June 11 (Reuters) - The Brazilian real firmed on Monday, taking a breather from the sharp swings it saw last week on rising trade tensions overseas and the central bank's intervention to bolster the currency.
The real posted its largest daily gain on Friday in a decade after central bank chief Ilan Goldfajn said the bank could offer as much as $20 billion worth of new currency swaps, which function like dollar sales for future delivery, to provide liquidity and cushion the currency's selloff earlier last week.
The bank could also resort to other instruments, such as repo contracts or even dollar sales in the spot market, Goldfajn added.
"The bank cannot be predictable, otherwise it may end up setting up a floor and a ceiling for the currency, so that keeps the market on its toes," a manager at a São Paulo-based brokerage said.
Goldfajn's remarks helped to curb losses in the Brazilian real, which after weakening around 10 percent this year ranks as Latin America's second-worst performing currency.
For months, analysts and investors have warned that concerns over Brazil's fiscal outlook and this year's presidential elections have left the currency more vulnerable to sudden swings in demand for emerging market assets.
Those warnings proved to be well founded over the last few weeks as bets on accelerating U.S. inflation, a widening U.S. fiscal deficit, fears of a global trade war and geopolitical tensions drove worldwide risk aversion, leading many investors to start to unwind bets on emerging market assets.
The selloff gained further impetus on Monday after U.S. President Donald Trump lashed out at Canada and Europe over the U.S. trade deficit.
The Mexican peso, which has been dogged by fears that Trump may scrap the North American Free Trade Agreement (NAFTA) between the United States, Canada and Mexico, fell 0.6 percent, while most other Latin American currencies retreated slightly.
Yet the Brazilian real strengthened further, making it by far the best-performing currency in the region. A recent poll showing a rising number of undecided voters in October's elections, which some traders took as a sign that recent support for populist candidates may be fleeting, also helped allay investors' angst.
Brazil's benchmark Bovespa stock index rose 0.4 percent, with shares of electric appliance retailers B2W Cia Digital SA and Via Varejo SA among the largest gainers.
In a client note, analysts at Brasil Plural said analyst discussions with Via Varejo's management suggested a nationwide truckers' strike is unlikely to offset organic sales growth in recent quarters, while the company should also benefit from the World Cup soccer championship this month.
Key Latin American stock indexes and currencies at 1400 GMT: Stock indexes daily % YTD % change change Latest MSCI Emerging Markets 1140.70 0.47 -1.99 MSCI LatAm 2520.27 1.92 -12.57 Brazil Bovespa 73221.06 0.38 -4.16 Mexico IPC 46074.90 0.29 -6.64 Chile IPSA 5546.28 0.42 -0.33 Chile IGPA 28025.99 0.32 0.16 Argentina MerVal 31444.08 0 4.58 Colombia IGBC 12251.57 -0.09 7.75 Currencies daily % YTD % change change Latest Brazil real 3.6826 0.63 -10.03 Mexico peso 20.4050 -0.55 -3.46 Chile peso 632.6 -0.35 -2.84 Colombia peso 2861.06 -0.19 4.23 Peru sol 3.262 -0.03 -0.77 Argentina peso (interbank) 25.4000 -0.12 -26.77 Argentina peso (parallel) 25.75 -0.78 -25.32 (Reporting by Bruno Federowski Additional reporting by Paula Laier and Claudia Violante in São Paulo Editing by Paul Simao)