Brazil Said to See No Limit for Dollar Swaps Program

Brazil’s central bank sees no limit or risk for its U.S. dollar swaps program as reserves of $375 billion give credibility to the instrument that reached $99 billion last week, according to a government official involved in the discussions, who asked not to be named because the talks aren’t public.

The central bank will keep in place its daily currency intervention program through the end of the year, and any decision on exchange rate policy for 2015 will be made close to that date, the official said Oct. 10. The central bank sees no need to sell dollars from international reserves because there is adequate liquidity in the spot market, the official said.

The central bank in August last year started offering daily currency swap auctions after the real plunged to the lowest level in almost five years on signs of reduced monetary stimulus in the U.S. It has twice since extended the program, last saying in June that auctions would last at least through Dec. 31.

While the program initially buoyed the real and helped it become the only major Latin American currency to appreciate since the intervention started, it has depreciated 3.7 percent in the last month. That is complicating central bank efforts to slow above-target inflation as a weaker currency boosts the price of imports.

The real depreciated 1.3 percent Oct. 10 to 2.4291 per dollar, the biggest drop in more than a week.

Consumer prices rose 6.75 percent in September from last year, the largest increase since 2011 and the third time in 2014 that inflation has breached the official target range of 2.5 percent to 6.5 percent.

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