Tuesday, June 25, 2013

Reuters: US Dollar Report: UPDATE 1-Brazil central bank scraps reserve requirement to support currency

Reuters: US Dollar Report
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UPDATE 1-Brazil central bank scraps reserve requirement to support currency
Jun 25th 2013, 22:49

Tue Jun 25, 2013 6:49pm EDT

SAO PAULO, June 25 (Reuters) - Brazil's central bank said on Tuesday it would eliminate reserve requirements on banks' short-dollar positions beginning July 1, in another move to reduce capital controls and support the local currency after it hit a four-year low this month.

After years of trying to weaken the Brazilian real with taxes and reserve requirements, policymakers have reversed most of those measures this year as the prospect of tighter monetary policy in the United States boosts the dollar globally.

The real lost 0.7 percent against the greenback on Tuesday, weakening for the third straight session and accumulating a 7.5 percent slide this year.

At the beginning of June, Brazil scrapped a tax on foreign investments in local debt, a surprise move that briefly halted the real's sharp depreciation, which threatens to stoke already high inflation in Latin America's largest economy.

Still, the currency has lost about 3 percent this month.

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