MercoPress. South Atlantic News Agency

Containing Brazilian currency appreciation is costing billions

Brazil Central Bank at Brasilia

Brazil's central bank posted a loss of 47.5 billion reais (28.5 billion US dollars) in 2007, triple the amount in the prior year, because of efforts to slow the strong real's appreciation against the US dollar.

The net loss reached 17.2 billion reais in the second half of last year, including a loss of 26.4 billion from transactions in the foreign exchange and swap markets, the bank said in a statement on its Web site. For all of 2007, the bank lost 55.6 billion reais in foreign exchange and swap transactions, and 15.6 billion on interest rate payments on debt. "Currency swaps and the inclusion in the bank's assets of resources that compose Brazil's international reserves generated a negative result because of the real's appreciation'' the central bank said in its earnings statement. The real rose 20% against the US dollar last year, its fifth consecutive annual increase. It has gained 27% over the past 12 months. Brazil's central bank has bought dollars almost every day in the currency market to slow the real's rally and to boost international reserves. Reserves reached 190.5 billion this month according to central bank data. The bank has also been selling reverse currency swaps monthly to give investors a hedge against a weaker dollar. In those contracts, the yield is the difference between the exchange rate variation and the accumulated benchmark interest rate during the contract term