Banco Central Do Brasil Announces Further Measures to Cap Real Gains

The Banco Central Do Brasil announced measures to discourage dollar shorting in order to cap a persistent rally of its currency, the Real.  The Bank will require that banks with short US dollar positions hold 60% of the value of short positions greater than $1 billion in non-interest bearing deposits at the central bank.  The Banco Central do Brasil had previously required banks to hold 60% of the value of short positions greater than $3 billion on deposit.  The Brazilian Real has appreciated 20% against the US dollar over the past two years.

Brazil’s central bank last increased the selic rate by 25 basis points to 12.25% in June this year.  Brazil’s high interest rate is one of the factors keeping the Real strong as speculators chase the high interest rate differential.  Brazil last reported an annual inflation rate of 6.55%, compared to the official inflation target of 4.50%.  The Brazilian government is forecasting economic growth this year of 4.5-5%, compared to GDP growth of 7.5% during 2010.  The Brazilian Real last traded around 1.56-1.58 against the US dollar.

FX_Trdr

14 years ago