RIO DE JANEIRO, BRAZIL – The Brazilian real experienced another day (Octiber 13) in which it depreciated negatively against its peers. Even on a trading day in which the dollar weakened globally, the Brazilian currency continued to depreciate.
For this reason, the Central Bank intervened by injecting the equivalent of US$1 billion into the market through currency swaps.
As a result, the dollar closed yesterday down 0.51% at R$5.5081, after reaching R$5.5731 at the peak of the day. After the close, the Central Bank announced a new auction of swaps worth US$1 billion, which took place this morning (14).
It should be recalled that the monetary authority had already flooded the market with new swaps since the end of September, anticipating the pressure expected at the end of the year from the adjustment of banks’ surpluses.
By morning, the Central Bank had already sold another US$700 million in foreign exchange swaps, bringing the total amount of swaps sold for this purpose to US$5.6 billion. The bank estimates that the amount of adjustments still to be made by financial institutions to comply with the law is US$17.6 billion.
Although the real is far from being one of the worst-performing currencies of the year, it has lost 5.17% of its value in the last month alone, trailing only the Turkish lira, which lost 8.13% in the same period.
According to Alfredo Menezes, manager of Armor Capital, the Central Bank may have felt compelled to be more present in the market due to a combination of factors. These include the fact that large exporters continue to hold resources abroad. Some fear that remittances of profits and dividends will increase because of the possible passage of tax reform and inflation.
“The central bank is more active precisely because inflation is giving us a hard time, and probably next year, when the elections bring more volatility, the work will be more difficult.”