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UPDATE 2-Brazil will not change FX intervention program -source
March 26, 2014 / 8:15 PM / in 4 years

UPDATE 2-Brazil will not change FX intervention program -source

(Adds background, details, updates price of real through close, paragraphs 6-10)

By Patricia Duarte

SAO PAULO, March 26 (Reuters) - The Brazilian central bank has no target level intended for its local currency and no plans to change its daily forex intervention program, a member of the government’s economic team told Reuters on Wednesday.

An initial partial sale of currency swaps - derivatives that provide hedges against currency losses - raised speculation on Wednesday that Brazilian policymakers could become less aggressive in their currency intervention as the real climbed to four-month highs.

“There are no changes (to the FX program) ... There was no message intended, no floor or ceiling for the currency,” said the official, who asked not to be named in order to speak freely.

Shortly after the central bank’s regular swap auction, in which it sold 2,400 of the 4,000 contracts offered, the bank conducted an additional auction in which it managed to sell the remaining 1,600 contracts.

Still, many analysts interpreted the move as a sign that policymakers are not willing to let the currency gain past the key 2.3-per-dollar level.

Although a stronger real helps the central bank battle inflation by reducing the price of imports, it also increases costs for local exporters.

Standard & Poor’s cut Brazil’s sovereign rating on Monday in part due to the country’s inability to bolster an economy that also struggles with high inflation.

The official said the bank decided to carry out an additional auction after it first received “bad” price offers for the swaps.

The central bank started its daily intervention program in August, but slowed its pace this year with policymakers offering $1 billion worth of traditional currency swaps per week.

The real closed up 0.5 percent at 2.3064 per U.S. dollar, bouncing from a session low of 2.2926. (Reporting by Patricia Duarte; Writing by Alonso Soto; Editing by Meredith Mazzilli and David Gregorio)

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