Reuters: US Dollar Report: UPDATE 1-Brazil intervenes heavily on FX market, real gains 0.5 pct

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UPDATE 1-Brazil intervenes heavily on FX market, real gains 0.5 pct Dec 3rd 2012, 20:04 Mon Dec 3, 2012 3:04pm EST * Central bank calls 2 swap auctions in the morning * Later, bank calls 2 auctions to sell dollars on spot market * Real closes 0.5 pct stronger at 2.119 per dollar By Walter Brandimarte RIO DE JANEIRO, Dec 3 (Reuters) - Brazil's central bank on Monday intervened heavily in the foreign exchange market to halt a sharp currency depreciation and boost dollar liquidity at the end of the year, when greenbacks are traditionally scarce in the country. The series of interventions, which included two currency swap auctions in the morning and two dollar auctions on the spot market in the afternoon, caused the real to close only 0.5 percent stronger at 2.1190 per U.S. dollar. The real had dropped to 2.1382 per dollar, its weakest level since early May 2009, before the central bank called two consecutive auctions to sell traditional currency swaps - derivative contracts that support the real by emulating the sale of dollars in the futures market. The real erased its losses and jumped as much as 1.6 percent after that initial move, which suggested the central bank was not comfortable with the currency's fast depreciation pace. But gains slowly faded in the afternoon as investors followed bank recommendations to reduce exposure to the real. The central bank then announced two separate auctions to sell as much as $5 billion on the spot market with the agreement to repurchase the amounts sold in 30 and 61 days, respectively. That is the first time the central bank sold dollars with repurchase agreements since April 2009 - a strategy it normally uses to provide temporary liquidity to the foreign exchange market. The central bank did not say how much it sold in the afternoon auctions, but it signaled there was demand for both. In a statement, the bank said it was setting cutoff prices of 2.12245 reais and 2.1324 reais for each of the auctions, with repurchase datef on January 4 and February 4, respectively. Link this Share this Digg this Email Reprints

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