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Brazil central bank intervenes in FX market again, selling $3 billion

BY Reuters | ECONOMIC | 08:45 AM EST

By Marcela Ayres

BRASILIA, Dec 26 (Reuters) - Brazil's central bank sold $3 billion in a spot auction on Thursday, extending a series of interventions in the foreign exchange market amid a greenback outflow from Latin America's largest economy.

Following the auction, which had been announced late on Monday ahead of the Christmas holiday, the Brazilian real strengthened 0.5% against the U.S. dollar, before paring some gains.

Year-to-date, Brazil's currency has lost over 21% against the dollar, one of the weakest performances among emerging markets.

Central bank governor Roberto Campos Neto last week said policymakers observed an unusually large year-end dollar outflow, as companies increased dividend remittances abroad and individuals moved funds through investment platforms.

He argued the interventions were not aimed at defending a specific rate but at avoiding dysfunction in currency trading.

Amid the spiraling depreciation exacerbated by fiscal woes, the total amount of dollars sold in the spot market neared $20 billion in recent days. The bank also held several dollar auctions with repurchase agreements totaling $11 billion.

The Brazilian real has faced intense pressure since a government fiscal package disappointed markets in late November, further weakening the currency amid the global strengthening of the dollar.

The real hit record lows multiple times this month, intensifying inflationary pressures and fueling markets' dissatisfaction with President Luiz Inacio Lula da Silva's government despite strong economic growth and low unemployment.

On Wednesday, when Brazilian markets were closed, Alphabet-owned Google's search engine displayed Brazil's real trading at an all-time low of 6.38 per dollar, far above Monday's close of 6.185, sparking government criticism.

Brazil's solicitor general asked the central bank to provide it with information about the exchange rate as it mulls potential legal action against Google, according to a statement.

Google did not immediately respond to a request for comment. (Reporting by Marcela Ayres; Editing by Gabriel Araujo, Alexandra Hudson)

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