UPDATE 1-Brazil real unlikely to return to record highs-min

Fri Oct 3, 2008 12:51pm EDT
(Adds context, reserves and quotes)
SAO PAULO, Oct 3 (Reuters) - Brazil's currency may not strengthen to previous levels because of ongoing global market turmoil and the government may use international reserves to increase liquidity, the finance minister said on Friday.
"My impression is that the currency will not return to the levels of the (recent) past, it will keep at a more realistic level," Guido Mantega said in a speech in Sao Paulo.
The currency had been trading at its strongest level since 1999 before the recent plunge, causing some exporters to demand protection from the government.
Since early August, the real BRBY dropped more than 20 percent as uncertainty over the fate of the U.S. economy pushed investors out of riskier emerging market currencies into the U.S. dollar.
Mantega said the government is preparing new measures to help boost credit to exporters after trade finance tightened because of the global liquidity crunch.
Brazil also could tap its more than $200 billion of international reserves, Mantega said.
The central bank has offered dollar repurchase agreements to help ease a liquidity crunch in the foreign exchange market. It uses dollars from the reserves for these operations but they are returned in 30 days, Mantega said.
The government was also considering other "creative" ways of using the reserves to help liquidity, Mantega said, without providing further details. (Reporting by Daniela Machado; Writing by Ana Nicolaci da Costa; Editing by Theodore d'Afflisio)