Brazil Central bank Steps In into Help World’s Worst Currency #Central_BankFebruary 14, 2020
The monetary authority auctioned $1 billion in foreign-exchange swaps on Thursday, all the 20,000 contracts offered.
The real erased losses of as much as 0.65% after the announcement of the auction, which came after several statements from policy makers that they were comfortable with the current level of the currency.
The real has successively reached all-time lows since Jan. 31, when it breached the previous record and fell past the level at which the central bank last sold dollars in the spot market to prop up the currency in November.
“I struggle to see this as a game-changer for the real,” said Alvise Marino, a currency strategist at Credit Suisse in New York.
“Brazil is still the one country in EM with hikes priced in, which makes the currency vulnerable to further shocks to the growth outlook.”
Investors are warming up to the idea that the currency can continue to weaken even as other local assets rise, Marino said.
It was the third time the central bank announced an intervention in just a few days, or even hours, after downplaying chances of such a move.
On Wednesday, President Roberto Campos Neto defended the floating foreign-exchange regime and said authorities would intervene in case they spotted an imbalance in the market.
The real is down 6.7% this year and is the worst performer among 31 major currencies tracked by Bloomberg due to its diminished carry appeal as interest rates were cut to a record low of 4.25%.
To contact the reporter on this story: Aline Oyamada in Sao Paulo at firstname.lastname@example.org
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