(Bloomberg) -- Brazil’s central bank said it would sell as much as $1.5 billion in an auction on Friday, a move that comes after weeks of volatility in the nation’s currency.
The announcement on Thursday night followed a fourth straight day of losses for the real, one of the worst performing currencies in emerging markets this year. The auction will take place on Friday morning on the spot market.
In addition to concerns around President Luiz Inacio Lula da Silva’s spending policies and the future path for interest rates, the real has also taken a hit — along with Mexico’s peso — from the unwinding of so-called carry trades amid a rally in the Japanese yen. The region’s double-digit interest rates had previously made it a preferred target for the strategy, which involve borrowing in the currency of a low-yielding country to buy high yielders.
The last time the central bank intervened in this way was in December 2021, according to the institution. Prices will be based on the so-called PTAX rate, which is the official fixing for the currency.
In April the bank offered $1 billion in swaps, a type of intervention that’s more commonly used by the bank.
Last month traders speculated on a possible intervention in currency markets, which the central bank has largely refrained from in the past few years, after the real breached 5.7 per dollar.
The real is down almost 14% this year, the worst performing major currency after the Mexican peso. It has fallen 2.5% this week, also trailing only the peso for losses over that time.
--With assistance from Julia Leite.
©2024 Bloomberg L.P.
