Brazil Announces 60 Billion Plan to Slow Real Fall

Brazil’s central bank has announced a $60bn plan to prop up the value of the national currency.

It comes as the Brazilian real nears a five-year low against the US dollar.

The real and other emerging market currencies have fallen steadily over the last three months on speculation of higher US interest rates.

The central bank said it would spend $500m a day on Mondays to Thursdays and $1bn on Fridays buying reais in the currency markets.

The Monday-to-Thursday interventions will target currency swap markets – financial derivatives used by companies and investors to hedge their currency exposure – while on Fridays, the central bank will buy the national currency directly in return for US dollars.

The interventions will run up until December.

“This shows the firm determination of monetary authorities to keep the exchange rate from slipping further,” said Andre Perfeito, chief economist at Gradual Investments in Sao Paulo.

It is the first time the central bank has pre-announced daily interventions in this way since 2002 – a time when markets were speculating over a possible Brazilian debt default, following the financial collapse of neighbouring Argentina and with the imminent election of President Luiz Inacio Lula da Silva.

via BBC

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.