08/30/2024 – 13:12
By Fernando Cardoso
(Reuters) – Brazil’s central bank sold $1.5 billion in a spot auction of the U.S. currency on Friday held between 9:30 a.m. and 9:35 a.m., the agency said in a statement, with central bank president Roberto Campos Neto saying the move was to deal with an “atypical flow” of dollars resulting from a market index rebalancing.
The BC had announced the auction the day before, adding that the sale would be referenced at the Ptax rate and that up to 1.5 billion dollars would be sold.
The auction took place after four days of strong growth in the spot dollar, which reached 5.6227 reais on Thursday, accumulating an increase of 2.61% in the last four sessions.
At an event promoted by XP Investimentos, Campos Neto said that the actions occur at times of market dysfunction, also indicating that if it is necessary to make further interventions in the exchange rate, “we will do so”.
“We are experiencing an atypical flow movement due to an index rebalancing… it is up to the Central Bank to map the size of this imbalance, how much is needed to supply this atypical flow, and we are also looking at the difference in what we understand to be a very large detachment from the fundamentals, sometimes due to liquidity criteria, sometimes due to short-term noise,” he said.
The statement came amid the rebalancing of Morgan Stanley Capital International, one of the main reference indexes for investors investing in international stock exchanges.
Campos Neto highlighted that the Central Bank has sufficient reserves to carry out foreign exchange interventions when necessary.
This was the second intervention in the exchange rate carried out by the BC since the beginning of President Luiz Inácio Lula da Silva’s term, the first being in the spot market.
The BC did not intervene in the market when the dollar surpassed 5.85 reais during the session on August 5th.
The institution, on the other hand, entered the market on April 1st of this year, when the dollar was at 5.0888 reais, offering 20,000 foreign exchange swap contracts (1 billion dollars). At the time, the BC reported that the operation sought to meet part of the demand generated by the redemption of the NTN-A3 bond, scheduled for April 15th.
Since the NTN-A3 was indexed to the dollar, the maturity was generating additional demand for hedging in the foreign exchange market. The sale of a foreign exchange swap is an operation whose effect is equivalent to the supply of dollars in the futures market.
After starting Friday’s session with a downward trend, reflecting a certain caution abroad and in anticipation of the auction, the dollar began to soar again against the real.
The US currency hit a session low shortly after the end of the auction, at 9:40 am (-0.72%), but was unable to sustain the fall and began to advance shortly after, rising by more than 1% at one point.
At 12:57 p.m., the dollar was up 0.19%, at 5.6333 reais for sale.
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