Brazil’s central bank sells $ 1 billion in surprise currency swap auction

SAO PAULO, Oct. 13 (Reuters) – Brazil’s central bank sold $ 1 billion in currency swaps in a surprise auction on Wednesday afternoon, and later announced it would hold another sale Thursday, seeking to boost the local currency for nearly six months. .

The central bank said it sold the 20,000 foreign exchange swap contracts offered in an unscheduled auction, double the volume offered in the bank’s previous surprise auction on September 30.

The sale had an immediate impact on the real, which reversed losses to trade around 0.5% at 5.51 reais per dollar.

Later on Wednesday, the bank announced it would sell up to an additional $ 1 billion in a second unscheduled auction, which is due to take place Thursday morning.

The real is down nearly a third against the US dollar this year as investors fear political risks, a fragile economic recovery and the prospect of higher interest rates in richer economies.

Last month, Brazil’s central bank announced it would hold additional twice-weekly auctions of traditional currency swaps, to meet demand from banks dismantling their “over-hedged” positions in derivatives markets.

Earlier Wednesday, the central bank’s director of political economy Fabio Kanczuk said the market reaction to the bank’s announcement of the regular swap auctions had been weaker than expected.

Reporting by Luana Maria Benedito; Additional reporting by Marcela Ayres in Brasilia; Writing by Gabriel Stargardter; Editing by Brad Haynes and Peter Cooney

Our Standards: Thomson Reuters Trust Principles.

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