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EMERGING MARKETS-Chile's peso jumps as intervention jolts shorts, Brazil's real drops

By Aaron Saldanha

* Chile's peso sees second best day in 10 years on intervention * Brazil's real slides 1%, intervention's effect wanes By Aaron Saldanha Nov 29 (Reuters) - Chile's peso starred among Latin American currencies on Friday, bouncing off an all-time closing low on news of a chunky central bank intervention program, which set it on course for its second best day in more than a decade. The country's central bank late on Thursday said it would sell up to $20 billion in foreign currency interventions starting on Monday aiming to stabilize the peso, which prompted some short-sellers to scale back bets on further weakness. "Chile has around $40 billion in reserves," said Guido Chamorro, a portfolio manager for Pictet Asset Management in London. "This (FX intervention) program is $10 billion plus $10 billion. It is a pretty big number but if it's big a number, it better work." The announcement had the desired effect despite the release of data on Friday showing manufacturing production dropped 5.8% in October from a year earlier, as well as news of sinking profit at state-owned copper mining giant Codelco. Weekly Refinitiv Lipper data ended Nov. 20 showed international investors were still allocating money to a popular Chile-focused ETF despite increasingly violent protests against inequality which have led to over 25,000 people being detained. Simon Harvey, FX market analyst at Monex Europe, said the intervention was "deemed credible" but he did not see the currency firm to under the 800 peso-per-dollar mark due to local factors such as protests, instead suggesting the Chilean central bank would allow the currency to weaken but at a slower pace than market factors dictate. "The central bank is going to have to strike the balance of cutting rates next week to stimulate growth while not making it counter-intuitive to their intervention policy in FX markets." Moving in the other direction, Brazil's real weakened 1%, drifting towards a record low hit on Tuesday, as the effects of central bank intervention wore off. Monex Europe's Harvey said Brazil's real had traded in the 4 to 4.20 reais-per-dollar range for most of the fourth quarter, which it had recently broken out of, leading to rising political pressure to bring it back within that range. Nevertheless, the weaker currency was providing some insulation to the local economy from slowing global growth and tepid external demand, he said. Stocks on Sao Paulo's Bovespa dipped 0.4%, as the energy sector bore the brunt of a 2% decline in Brent crude futures, with shares of oil firm Petroleo Brasileiro SA (Petrobras) falling 1%. Mexican equities slid 0.5%, largely on losses among consumer staples and materials, broadly in line with the decline seen in the peso. While Colombia's peso softened 0.5% and stocks slipped 0.2%, Argentinean assets marked time. Latin American stock indexes and currencies at 1732 GMT: Stock indexes Latest Daily % change MSCI Emerging Markets 1038.90 -1.09 MSCI LatAm 2646.39 0.1 Brazil Bovespa 107911.41 -0.35 Mexico IPC 42872.20 -0.53 Chile SPIPSA 4515.26 -0.08 Argentina MerVal 34264.79 0.132 Colombia Colcap 1600.71 -0.18 Currencies Latest Daily % change Brazil real 4.2315 -0.38 Mexico peso 19.5520 -0.42 Chile peso 805.8 2.73 Colombia peso 3524.48 -0.38 Peru sol 3.402 -0.24 Argentina peso (interbank) 59.8500 -0.12 (Reporting by Aaron Saldanha in Bengaluru, Additional reporting by Marc Jones in London; Editing by Lisa Shumaker)