MercoPress. South Atlantic News Agency

Brazil’s central bank buys 5.9 billion USD to contain revaluation of the Real

Meirelles can also count with the sovereign wealth fund to buy greenbacks

Brazilian central bank President Henrique Meirelles stepped up dollar purchases to the highest in almost a year this month in a bid to temper gains in the Real.

The central bank bought 5.9 billion US dollars in the first 12 businesses days of September, Altamir Lopes, head of the bank’s economic department, told reporters Tuesday. The purchases are the biggest for the period since October 2009, when policy makers bought 6.3 billion USD.

Efforts to keep a lid on the currency may get a boost after the government on Sept. 17 authorized its 17.9 billion Real (10.4 billion USD) sovereign wealth fund to buy an unlimited amount of dollars with Real to supplement the central bank’s purchases in the currency market.

However the fund hasn’t purchased dollars yet revealed Finance Minister Guido Mantega.

In spite of efforts Brazil’s currency kept gaining against the US dollar. Since the beginning of the month, the Real has strengthened 1.9%.

“The Real isn’t appreciating because of speculation, but based on economic fundamentals,” said Andre Perfeito, an economist at Sao Paulo-based brokerage Gradual Investimentos. “Not even Japan’s central bank can prevent its currency from gaining, let alone Brazil’s.”

Perfeito said currency traders in Brazil are being made “nervous” by the strong language government officials are using to express their discomfort with the appreciation of the Real.

A stronger currency makes Brazilian exports more expensive in dollar terms, cutting into profits at companies that rely on overseas sales.

The Real has gained 34% since the beginning of 2009. The Brazilian government has announced a review of its monetary policy to contain the strengthening of the Real for next month, following the October 3 presidential election when the ruling coalition candidate Dilma Rousseff is expected to win with a comfortable margin.