Brazil's central bank will continue intervening in the foreign exchange market using all tools at its disposal and in whatever size necessary to ensure the market functions smoothly, monetary policy director Bruno Serra said on Monday.
Speaking at an event at Bloomberg News in Sao Paulo as the central bank intervened in the spot currency market for the first time since November, Serra said Brazil's net FX reserves are robust enough to protect against external shocks.
Serra said the decision to triple the size of Monday's spot market dollar auction to $3 billion from the $1 billion announced on Friday shows the central bank's determination to do whatever it takes to calm extremely jittery markets.
"The situation has changed very quickly," Serra said. "We will continue (intervening) as much as necessary as long as we believe that the market is not functioning smoothly."
The central bank's $3 billion auction on Monday was its first spot currency market intervention since November. It followed a series of dollar swaps auctions in recent weeks that totaled almost $10 billion in nominal terms.
Monday's intervention helped lift the real off its fresh record low below 4.79 per dollar struck in early trading as local markets reacted to the intense volatility and steep declines across world markets triggered by a collapse in oil prices.
In mid-morning trading on Monday, the real was still down around 2.5% from Friday, changing hands at 4.75 per dollar, while the Bovespa stock index was down 10%, meaning it was down 25% from its peak at the end of January.
Serra insisted that Brazil has the policy tools at its disposal to tackle the current crisis, noting room to cut interest rates and lower reserve requirements on top of its FX instruments.
"Interventions have been targeted, but can go on as long as necessary, until the foreign exchange market functions normally again," Serra said, adding that Brazil's net $330 billion reserves is a robust insurance against external shocks. (Reporting by Jamie McGeever; Editing by Alex Richardson and Will Dunham)
Don’t miss a golden opportunity.
Now that you’ve gained a deeper understanding about gold, it’s time to browse our selection of gold bars, coins, or exclusive Sprott Gold wafers.
About Sprott Money
Specializing in the sale of bullion, bullion storage and precious metals registered investments, there’s a reason Sprott Money is called “The Most Trusted Name in Precious Metals”.
Since 2008, our customers have trusted us to provide guidance, education, and superior customer service as we help build their holdings in precious metals—no matter the size of the portfolio. Chairman, Eric Sprott, and President, Larisa Sprott, are proud to head up one of the most well-known and reputable precious metal firms in North America. Learn more about Sprott Money.
Learn MoreYou Might Also Like:
Looks like there are no comments yet.