Brazil’s central bank eased restrictions on local banks’ ability to raise funds abroad, adding to government efforts to slow a decline in the currency prompted by concerns the U.S. may unwind monetary stimulus.
The monetary authority, in a statement, eliminated capital requirements that increased the costs for banks to bring into the country foreign currency loans raised by their subsidiaries abroad.
As investors dump emerging market assets, President Dilma Rousseff’s government in recent weeks has begun to unwind capital controls put in place over the past five years. The real has declined 9.5 percent since May 21, the day before Federal Reserve Chairman Ben S. Bernanke said that an $85 billion a month bond buying program may be scaled back if the U.S. job market keeps improving. That’s more than any other currency tracked by Bloomberg except Uruguay’s peso.
Today’s measure is unlikely to stem the currency’s decline, Roberto Padovani, chief economist at Votorantim Ctvm, said. Still, the move is further evidence the government is taking a more market-friendly tack after battling investors who pushed the real to a 12-year high in 2011, he said.
“It’s a positive move in the sense it’s showing the government strategy of favoring a freer movement of capital,” he said in a phone interview from Sao Paulo. “The entire world is worried about liquidity.”
In June, the bank eliminated reserve requirements on short dollar positions held by local banks and also scrapped taxes on currency derivatives and foreign purchases of bonds.
The real gained 0.4 percent to 2.2556 per U.S. dollar today. Bernanke said yesterday the U.S. economy needed a “highly accommodative monetary policy for the foreseeable future.”