MercoPress. South Atlantic News Agency

Brazilian Central Bank Purchases Dollars to Limit Gains in the Real

Meirelles said the Central bank would maintain its policy of building reserves

Brazil’s Real fell on Friday for the first time in three days as the government stepped up efforts to limit gains in the currency. The real lost 0.6% to 1.7384 per dollar at the end of the week after increasing 2.4% in April and 1.1% for the week.

Brazil's Real lost ground after the Central Bank of Brazil purchased US dollars in the spot market for a second time Friday and its president, Henrique Meirelles, said the monetary authority would maintain its policy of building reserves.

The Brazilian currency soared for a third straight month as foreign inflows picked up before Brazil’s policy makers increased the benchmark Selic rate 0.75 percentage-point to 9.5 percent on April 28 to stem inflation and cool the economy. Brazil’s foreign reserves climbed 26% to a record 247 billion US dollars over the past two years as the Central Bank bought dollars in the spot market to slow the rally in the Real. The currency increased 33 percent last year.

Treasury Secretary Arno Augustin told reporters in Brasilia that the Treasury may more than double its dollar purchases in the market. On April 26, Finance Minister Guido Mantega said he may take “further measures” to limit gains. Mantega levied a 2% tax on foreign purchases of stock and fixed-income assets in October, helping push the real down 3.5% over two months.