Forex Blog: Currency Trading News & Analysis.

November 22nd 2007

Brazil Continues to Intervene

For nearly two months, the Central Bank of Brazil was content to sit on the sidelines and watch its currency, the Real, appreciate rapidly against the Dollar.  Beginning on October 8, however, the Central Bank has intervened in forex markets every day as part of a targeted effort to depress the Real.  Its efforts have been relatively straightforward; rather than issue currency stabilization bonds, the Central Bank has opted to purchase massive quantities of Dollar-denominated assets in the open market, bringing its foreign exchange reserves to $168 Billion.  Moreover, its efforts have been largely successful, as the Real has fallen slightly against the Dollar during this period of intervention.  However, logic (and past experience) dictate that as soon as it stops intervening, the Real will resume its  previous (upward) course against the Dollar. Bloomberg News reports:

Foreign flows into Brazilian financial markets and booming commodity exports have made the real the best performer against the dollar this year among the 16 most-actively traded currencies tracked by Bloomberg, gaining 20 percent.

Read More: Brazilian Currency Falls After Central Bank Buys U.S. Dollars

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Posted by Adam Kritzer | in Central Banks, Emerging Currencies | No Comments »

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