As the Brazilian real slips into all-time lows against the greenback, the Central Bank of Brazil scrambles to recover it. The real’s fall forced the central bank to intervene twice to ease the pressure off it.
This comes after the recent confident remark of the Brazilian economy minister.
Economy Minister Paulo Guedes said that he is not worried about the weakness of the real. Guedes said the market should be used to the higher exchange rate and the lower interest rates of the central bank.
Earlier today, Central Bank of Brazil Chief Roberto Campos Neto said that the bank is ready to intervene again if needed. Brazilian policymakers are monitoring if they need to “normalize” the foreign exchange market.
The monetary authority of Brazil sold dollars on the spot market twice yesterday to prop the real.
Campos Neto said that the market was “dysfunctional” when the bank intervened with the foreign exchange setting. He added that the aid will not a have long-term effect on the currency, worrying traders about its outlook.
However, the Brazilian policymaker confidently said the country is ready to face turbulence in the forex market.
If the Brazilian central bank did not step in yesterday, the US dollar to real exchange rate would’ve hiked to R$4.2700.
As of writing, the USD BRL trading pair is currently holding at R$4.2333 in sessions. Traders are in a state of flux. They are both worried and relieved this Wednesday.
Worried that if the greenback suddenly gets a boost from trade war progress it would push the reals further. Relieved because the Brazilian central bank’s intervention gave them room to breathe.
Since the beginning of the month, the US dollar has made significant gains against Brazil’s real in sessions. The USD BRL pair made its biggest jump on November 6 when it surged from R$3.9934 to R$4.0832.
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