Good morning! Brazilian Central Bank to intervene in currency depreciation. Will Bolsonaro be able to regain support in Congress? Income inequality rises for the 17th straight quarter.
Brazilian Central Bank to intervene in currency depreciation
After losing 3% against the U.S. Dollar
over the past 5 days, the Brazilian Real starts this week under tremendous pressure, at 4.10 to the USD—its lowest level in 9 months. And it could get worse, as political strains between the government and Congress threaten to paralyze the reform agenda. At least for now, the Central Bank has decided to tame the loss of value, holding three currency auctions, for USD 3.75bn, by Wednesday.
Under president Roberto Campos Neto, the bank has changed its traditional currency protection strategy, through swap contracts—meaning the future sale of dollars—for a direct offer in the on-demand market, where dollars are sold with a buyback commitment. The last time the Central Bank used that instrument was late in April, when the USD got closer to the BRL 4 mark.
Some investment firms have decided to enhance their positions in BRL against other Latin American currencies, betting that the tide will turn in the short to mid-term. The move,...