Brazil Real Holds Within 0.1% of Two-Week High on Swaps Auction

Brazil’s real held within 0.1 percent of a two-week high after the central bank sold reverse currency swaps for a second time this week to support exporters by preventing appreciation.

The central bank sold 28,300 of 30,000 reverse currency swaps offered at an auction, including $1.1 billion worth of contracts due in December and $300 million worth of contracts due in January, according to a statement by the bank.

The real closed unchanged at 2.0259 per dollar. The currency reached a two-week high of 2.0242 per dollar on Oct. 22.

“The tendency for the real is positive with less risk aversion and a net foreign currency inflow,” said Newton Rosa, economist at Sulamerica Investimentos, in a phone interview from Sao Paulo. “But the central bank only lets the real fluctuate within tight limits.”

Brazilian swap rates fell as unemployment rose 0.1 percentage point to 5.4 percent, exceeding the median estimate of 5.3 percent by 35 economists in a Bloomberg survey.

Swap rates on the contract due in January 2014 fell two basis point, or 0.02 percentage point, to 7.34 percent, after earlier rising one basis point.

The central bank said Oct. 23 it auctioned 33,000 reverse currency swaps contracts out of 60,000 offered, including those due on Dec. 3 for $849 million and contracts due on Jan. 2 for $799 million.

The bank sold $1.3 billion in reverse currency swaps on Oct. 5, $5.7 billion of contracts Sept. 12 through Sept. 17 and $350 million on Aug. 21 to weaken the real. The August reverse swaps were the first since March.

Defend Competitiveness

Finance Minister Guido Mantega told the daily Valor Economico yesterday that the government’s “dirty float” currency policy will last as long as necessary to defend the country’s competitiveness. A Finance Ministry official didn’t respond to e-mail and phone messages.

The real has dropped 7.8 percent this year, the biggest decline among 16 major currencies tracked by Bloomberg.

Brazil had a net foreign currency inflow of $1.6 billion this month as of Oct. 19, according to data released by the central bank yesterday.

To contact the reporters on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net; Josue Leonel in Sao Paulo at jleonel@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net