Central Bank makes first intervention in the exchange rate during the new Lula government after the dollar reaches R$ 5.05

O central bank announced its first exchange rate intervention since the beginning of the president’s third term Luiz Inácio Lula da Silva (PT) after the dollar closed at R$5.05. The action consists of an additional auction of up to 20 thousand contracts currency swap, equivalent to US$1 billion, to provide protection against excessive variations in the dollar in relation to the real (exchange rate hedge) and guarantee liquidity to the domestic market. This measure seeks to maintain the regular functioning of the foreign exchange market in view of the effects of the redemption of the NTN-A3 (National Treasury Note) bond scheduled for April 15th. The currency swap is a tool used by the Central Bank to inject dollars into the futures market and protect those who buy in the event of devaluation of the real.

The contracts offered expire on January 2, 2025 and April 1, 2025, equivalent to approximately US$3.7 billion in current values. The BC will accept proposals from financial institutions between 12:30 pm and 12:40 pm, with the result announced later. In addition to this auction, the monetary authority will hold a traditional auction of up to 16 thousand contracts (US$800 million) in rolling instruments existing on the market. The dollar closed this Monday at R$5.058, influenced by the rise in American Treasury bonds and low liquidity due to the European holiday. These interventions aim to stabilize the foreign exchange market in light of recent fluctuations.