O central bank sold 2 billion dollars on Friday auctions SELLING CURRENCY CONNECTED WITH PURCHASE ATTRESS IN THE INTERBANCARY MARKET, IN OPERATION THAT HAS NOT PERFORMED Since the end of 2021.
The BC uses this instrument mainly in times of lack of liquidity in the exchange In sight, which usually occurs at the end of the year.
The market comment is that the BC may have carried out the operation to adjust the exchange coupon (interest rate in dollar), which accelerated the rise recently.
Punctual corporate demand was also cited by operators as a reason for the BC’s extraordinary auction.
The spot dollar had a strong rise against the real this Friday, replicating generalized risk aversion abroad, but until the day before the real had been showing one of the best global performances, supported by high interest rates in Brazil and the prospect of an economic policy. more pragmatic in the next government.
The BC announced the auction announcement on Thursday night and, when holding them this Friday, accepted two proposals, with a cut rate of 4,190000%.
Liquidity placement will be settled on the 27th and currency repurchase is scheduled for November 3.
The sale of currency combined with purchase, also called a line auction, consists of a dollar operation in the spot market together with a forward dollar auction at the reverse end.
Thus, it does not affect the foreign exchange exposure of the institutions involved; in theory, therefore, with no direct effect on exchange market prices.
When intervening on the market, the monetary authority usually uses more exchange swap contracts, which allow for exchange of profitability.
In the case of the traditional exchange rate swap, the BC pays the exchange rate variation in the period plus the exchange coupon to the market; in exchange, the swap borrowers agree to remunerate the BC at the Selic rate.
The BC’s objective with this instrument is to avoid a dysfunctional movement in the exchange market, providing exchange hedge protection against excessive variations of the dollar in relation to the real and liquidity to the businesses.
The placement of traditional swap contracts, therefore, acts as a dollar injection in the future market.
Another modality of currency intervention instrument is the sale or direct purchase of dollars in the more unusual market, however.
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