Brazilian Real Devalues Further Despite Central Bank Intervention

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Not even the auctions announced by Brazil’s Central Bank (BCB) on Friday night, after markets had closed, managed to hold the US currency’s appreciation in relation to the Brazilian real at the start of this week.

The US dollar closed on Monday, May 20th, at R$4.105/US$1, with a slight increase of 0.07 percent. The exchange rate is the highest value for the North American currency in eight months.

Nonetheless, some economists saw the monetary authority’s plan as a relief. “At the margin, I think the feeling of risk has improved, but the president’s team (Bolsonaro) still lacks a friendlier attitude,” Rogério Braga, a partner and strategist at Quantitas, told Reuters.

Last Friday, in order to contain volatility in the foreign exchange market, the BCB announced the auctioning of US$3 billion of the country’s international reserves on Monday, May 20th, Tuesday, May 21st, and Wednesday, May 22nd.

“Technically, there is plenty of room for the dollar to depreciate (against the Brazilian real). But this space is largely limited by internal political questions. The market is operating sideways, waiting for this week with much reason for caution,” Cleber Alessie Machado, an operator at H. Commcor, told Reuters.

The monetary authority had not conducted auctions of this type since the end of March.

Unlike the exchange rate, Brazil’s stock market registered strong gains on Monday. After three sessions in decline, the São Paulo Ibovespa closed on Monday up by 2.17 percent, at 91,946 points.

This was the highest daily percentage gain of the index since March 28th, when it rose 2.7 percent. On Friday, May 17th, the Ibovespa had closed at 89,993 points, its lowest level of the year.