BC Interventions in the Forex Market Mark Week with Record BRL Levels Due to Seasonality and Risk Aversion (12/20)
The Copom minutes reinforced the need for a predictable, credible, and countercyclical fiscal policy to harmonize with monetary policy. Thus, the recent government announcement of fiscal adjustment contributed significantly to the unanchoring of inflation, which has been reflected in risk premiums, despite Copom’s hawkish stance.
Highlight for the Brazilian currency, which reached R$ 6.30 this week, reflecting domestic risk aversion combined with the strengthening of the dollar and the seasonality of financial exchange flow. Consequently, the Central Bank intervened in the foreign exchange market, with a total amount of US$ 16.8 billion in spot auctions, in addition to US$ 11.0 billion in line auctions since last week.
Thus, the BRL showed significant improvement, with performance similar to its peers this week but still at a highly depreciated level – accumulating more than 25% increase this year.
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