Search This Blog

Monday, June 30, 2014

Brazil central bank appears to cut short currency swap rollover

(Reuters) - Brazil's central bank did not announce so far on Friday a usual auction to roll over currency swaps that are set to expire early next month, a sign it wants to slow recent gains in the real.

The bank has so far rolled over slightly more than 85 percent of the $10.1 billion worth of expiring currency swaps, derivatives it has been regularly selling to investors who demand protection against currency losses.

The regular sale of swaps has been part of a successful central bank program of intervention in the foreign exchange market, which has helped the real BRL= gain more than 7 percent so far this year.

Earlier this week, policymakers extended the intervention program without changes until the end of the year, causing the real to rally past the level of 2.2 per dollar for the first time in more than two months.

A central bank spokesman declined to comment on whether or not a rollover auction would take place on Monday, but the bank consistently announces those auctions around 6:30 p.m. (2130 GMT) on the session prior to the sale.

If it kept its regular roll-over pace, the bank would auction on Monday as many as 10,000 swaps worth $500 million, closing the month with a roll-over rate a little above 90 percent.

Although the number of swaps that policymakers will allow to expire in July is not that large, the bank's decision to cut short the rollover sends a signal to the market about the desired level of the real.

Over the past couple of months, the central bank had succeeded in stabilizing the real largely within 2.20 to 2.25 per dollar.

Many analysts believe that tight range should prevail in the short term as it is considered a sweet spot for both exporters and policymakers worried about inflation from imported goods.

reuters.com

No comments:

Post a Comment