WRAPUP-Brazil's central bank points to new FX trading band
* Real initially rallies as gov't seen favoring strong FX
* Central bank intervenes to halt currency gains
* Mantega suggests gov't willing to accept stronger real
* Analysts see new trading band of 1.95-2.05 per dollar
RIO DE JANEIRO, Feb 8 (Reuters) - Brazil's central bank intervened to halt a currency rally on Friday, essentially setting the boundaries of a new informal trading band that government officials hope will help curb inflation without hurting exporters.
The intervention followed a week of intense volatility in the currency market as investors scrambled to figure out how policymakers were adjusting Brazil's foreign exchange policy. The real, which stabilized around 1.97 per dollar in the afternoon, is now likely to enter the traditional Carnival lull that will halt Brazilian markets for most of next week.
The real was rallying for a second day early on Friday after comments by a number of policymakers, including Finance Minister Guido Mantega, suggested the government was ready to accept a stronger currency to cheapen the price of imported goods and put a lid on inflation.
In an interview with Reuters on Thursday night, Mantega said the real, which last week gained past the level of 2 per dollar for the first time in seven months, "has found a reasonable floating band."
The minister, who has always defended a weaker real to support exporters, sounded more amenable to a stronger currency as he cited the 1.85-per-dollar threshold as an example of a level that would not be allowed.
His remark was interpreted as a green light for a stronger real, driving the currency more than 1 percent higher early on the day. It added to comments by central bank chief Alexandre Tombini, who on Thursday said he was worried about inflation in the short term.
The real had already gained about 0.8 percent on Thursday as investors speculated the government would use the exchange rate to curb inflation, which is dangerously close to the ceiling of a government target.
Brazil's currency had lost nearly 30 percent against the dollar between July 2011 and last November, but gained about 8 percent since then.
Signs that the government was not happy about the speed of appreciation of the real in the past couple of days were already evident early on Friday, when a source on President Dilma Rousseff's economic team told Reuters gains had been "somewhat exaggerated."
After piercing the level of 2 per dollar last week, market analysts estimated the real's informal trading range, which for months was set at 2.0 to 2.1 per dollar, was shifting to something around 1.95 to 2.05.
Investors, eager to test that theory, pushed the real to a nine-month high of 1.9510 per dollar this morning.
That was when the central bank intervened, offering to sell as much as 30,000 reverse currency swaps - derivative contracts that emulate the sale of dollars in the futures market and are often used by policymakers to weaken the currency.
"They seem to be doing two things: one is to try to slow down the appreciation of the real, but they also seem to be putting a boundary for the real at 1.95 per dollar, at least for now," said Enrique Alvarez, chief of Latin America research at IDEAglobal in New York.
Further adding to the notion of a new trading band around the level of 2 per dollar, Development Minister Fernando Pimentel told Valor Economico newspaper that a real between 1.96 and 2.05 per dollar would be acceptable to industry.