Reuters: US Dollar Report: UPDATE 1-Brazil ups reserve requirement threshold for dollar short sales

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UPDATE 1-Brazil ups reserve requirement threshold for dollar short sales Dec 18th 2012, 11:39 Tue Dec 18, 2012 6:39am EST * Decision changes rules first issued in July * Brazilian real advances less than 0.1 percent * Moves aim to stem a tumble in the currency By Guillermo Parra-Bernal and Natália Cacioli SAO PAULO, Dec 18 (Reuters) - Brazil's central bank announced it plans to raise the threshold at which banks must set aside reserves when short-selling the dollar, a move seen as aimed at shoring up the country's currency, the real. Independent financial institutions will now be allowed to be short by as much as $3 billion worth of dollars, up from the $1 billion threshold imposed in July, according to a statement published in the bank's Sisbacen newswire. The move takes effect Dec. 20. The 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 strengthened slightly, gaining about 0.1 percent to 2.0975 to the dollar. The currency has shed 12.2 percent this year. "This is to anchor the dollar and prevent any further gains" relative to the real, said a São Paulo-based currency trader who declined to be quoted because is not allowed to speak to the press. "I think the market couldn't sell dollars or increase their sales of dollars - 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. Link this Share this Digg this Email Reprints

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