UPDATE 2-Brazil facilitates dollar short sales to support real

* Decision changes reserve requirement rule issued in July

* Move aims to give liquidity to FX market, support real

* Brazilian real advances a 0.4 percent

By Guillermo Parra-Bernal and Natalia Cacioli

SAO PAULO, Dec 18 (Reuters) - Brazil's central bank on Tuesday made it easier for banks to bet against the U.S. dollar, in an attempt to provide liquidity to the foreign exchange market and support the real.

The central bank said it was tripling to $3 billion the limit for local financial institutions to short-sell the U.S. currency.

According to the new rule, which takes effect Dec. 20, banks have to park at the central bank 60 percent of short dollar positions that exceed that limit. The deposits should be in cash and will receive no interest rate.

In July, when policymakers were struggling to keep the real weaker than 2.0 per dollar, the central bank imposed a $1 billion threshold for short dollar positions, applying the 60 percent reserve requirement to larger positions.

The central bank also changed the period of calculation of such requirements to the average of five business days, longer than the prior one day calculation.

The real gained slightly after the measure and after the central bank conducted three auctions to sell as much as $1.5 billion repurchase agreements -- another attempt to provide liquidity to currency market at the end of the year.

It last traded at 2.0867 per dollar, 0.4 percent stronger on the day. Traders said substantial year-end dollar outflows kept a lid on the currency's gains.

"This is to anchor the dollar and prevent any further gains relative to the real," said a São Paulo-based currency trader. "This measure opens room for them to sell the greenback."

Central bank policymakers also eliminated a rule urging financial institutions to set aside reserve requirements on their foreign exchange short positions topping their reference capital base.