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Brazil sells US dollars from reserves for first time in ten years

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Christian Fernsby ▼ | August 23, 2019
Brazil’s Central Bank started Wednesday to auction dollars from its international reserves to hold the exchange rate in check.
Brazil central bank
LatAm   In the morning, $200 million were sold in cash
In the morning, $200 million were sold in cash.

Topics: Brazil U.S. dollars

This type of operation had not taken place since February 2009, during the peak of the global crisis triggered by the collapse in the US subprime mortgage crisis.

The new exchange intervention strategy was unveiled on August 14.

It consists of simultaneously selling cash to the market and buying the same amount in reverse swap contracts, which operate like the purchase of dollars in the future market.

The Central Bank plans to sell up to $3.845 billion by August 29.

The Central Bank argued that traditional currency swaps are demanded by investors seeking to protect exchange volatility, but part of the market is requiring dollars in cash due to the economic landscape.

The new intervention system proved effective on the first day.

Early this afternoon, the commercial dollar was being sold at R$4.021, down 0.76 percent.


 

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