MercoPress. South Atlantic News Agency

Central Bank of Brazil takes action to reverse real shrinking

The real is down nearly a third against the US dollar this year

Brazil's Central Bank Wednesday took an active role in the currency exchange market and sold US $ 1 billion to avoid a devaluation of the real, which has already lost a third of its value against the US dollar in 2021 alone

After the rate swaps auctioned Wednesday afternoon, Brazil's currency moved away from the minimum price in almost six months and closed 0.55% up, at R $ 5.508 / US $ 1.

The BCB said it sold 20,000 currency swap contracts offered in an unscheduled auction - twice the volume offered in the agency's last surprise auction on Sept. 30.

Last month, the BCB had also announced it would hold additional auctions of traditional currency swaps twice a week to meet the demand from banks dismantling their “over-hedging” positions in derivatives markets.

Another sale worth US $ 1 billion was scheduled for Thursday morning to boost the local currency from nearly six-month lows, it was announced.

The real is losing ground against the US dollar, with investors spooked by political risks, a fragile economic recovery and the prospect of rising interest rates elsewhere.

Last month, Brazil's central bank said it would hold additional auctions twice a week of traditional currency swaps, to meet demand.

Earlier Wednesday, BCB's Director of Political Economy Fabio Kanczuk said the market had reacted below expectations at the announcement of new regular swap auctions.