Brazil’s Central Bank Reduce FX Swap for Second Time in a Week

Brazil’s central bank reduced the daily rollover offer of swap contracts for the second time in less than a week as it scales back intervention in foreign exchange markets.

The central bank will offer to extend the maturity of 5,200 foreign-exchange swap contracts on Thursday, compared to 6,300 contracts it did on Wednesday, according to an statement sent after markets were closed in Sao Paulo. That amount compares with a daily roll over of 8,100 contracts last month. There are $4.72 billion in outstanding contracts due July 1.

“It seems like the central bank feels comfortable to continue with its strategy to decrease the amount offered to roll over, and that is coherent with that they’ve been saying lately,” Joao Paulo De Gracia Correa, a foreign-exchange superintendent at SLW Corretora de Valores in Sao Paulo, said in a phone interview. “The timing is good now, since the Fed signaled rates might not increase fast next year.”

The Federal Reserve signaled on Wednesday a pickup in U.S. economy is keeping it on track to raise interest rates this year, though subsequent increases are likely to be more gradual than anticipated earlier. Brazil’s tender extended gains and advanced 1.2 percent on Wednesday after Janet Yellen’s speech.

The real has risen 4 percent this month as Finance Minister Joaquim Levy pressed lawmakers to pass measures designed to produce a budget surplus before interest payments following a deficit last year.