Brazil central bank sells $1 billion in surprise FX swap auction

Brazil central bank sells $1 billion in surprise FX swap auction

Economy46 minutes ago (Oct 13, 2021 05:47PM ET)

(C) Reuters. A view shows the Central Bank headquarters building in Brasilia, Brazil October 4, 2021. REUTERS/Adriano Machado/Files

SAO PAULO (Reuters) – Brazil’s central bank sold $1 billion worth of currency swaps in a surprise auction on Wednesday afternoon, boosting the local currency from nearly six-month lows.

The central bank said it had sold all 20,000 foreign exchange swap contracts offered in a nonscheduled auction – double the volume offered in the bank’s last surprise auction on Sept. 30.

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

The real is down by nearly third against the U.S. dollar this year, with investors spooked by political risks, a fragile economic recovery and the prospect for rising interest rates in more wealthy economies.

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

Earlier on Wednesday, the central bank’s Political Economy Director Fabio Kanczuk said that there had been a smaller-than-expected market reaction to the bank’s announcement of those regular swap auctions.

Brazil central bank sells $1 billion in surprise FX swap auction

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Get the daily email that makes reading the news actually enjoyable. Stay informed and entertained, for free.

Your information is secure and your privacy is protected. By opting in you agree to receive emails from us. Remember that you can opt-out any time, we hate spam too!