Brazil Central Bank Ramps Up FX Actions, Cuts Swaps Pile

Brazil’s central bank has become more active in the currency market over the last few months, using different tools to intervene in what analysts say is a push to ultimately make the real more attractive and cut down on arbitrage trades.

Policymakers sold $1 billion in a spot dollar auction Wednesday, pairing it with a so-called reverse swap sale — the equivalent of purchasing greenbacks in the futures market — of the same size. With the combo, the central bank will sell physical dollars and unwind part of its position in FX swaps, through which it holds a short dollar position of $103 billion.