Brasília – One week after the purchase of dollars on the futures market, the Central Bank (BC) repeated the operation. The monetary authority auctioned all the 20,000 reverse exchange swap contracts on Friday (21), which totalled US$ 989 million. The BC offered 10,000 contracts maturing in January 2012; 8,000 mature in July 2011, with 2,000 maturing in April. The volume sold was a little greater than last week, when the monetary authority made available US$ 987.8 million.
Equivalent to the purchase of dollars on the futures market, reverse exchange swap operations help contain the depreciation of the dollar. This mechanism recently started being used again, one year and eight months after it was interrupted. In reverse exchange swaps, the Central Bank bets that interest rates will rise more than the North American currency. Investors bet on the opposite. Upon maturity of the contract, both parties exchange revenues from the operation. If the dollar drops, investors will make a profit and the Central Bank, a loss, taking on the risk of exchange rate fluctuation.
The purchase of dollars on the futures market is taking place with Central Bank funds alone, although the government has authorised the use of the Sovereign Fund for this kind of operation. A resolution published on the 10th in the Official Gazette authorises the fund to operate in the futures exchange market.
The inverted exchange swap had no effect on the value of the US dollar. The North American currency was being traded for 1.671 Brazilian reals per dollar, a reduction of 0.5% over the closing on Thursday, 20th.
*Translated by Mark Ament
