Brazil's Real Little Changed as Central Bank Sells Dollars

By Drew Benson

Oct. 20 (Bloomberg) -- Brazil's real was little changed as the central bank sold dollars to shore up the currency.

The real climbed to 2.1182 per dollar at 4:54 p.m. New York time, from 2.119 on Oct. 17. The real has plunged 26 percent since it hit a record 1.5545 per dollar on Aug. 1.

The central bank sold dollars in the spot market at 2.121 per dollar. The currency erased early gains that saw it reach 2.076 per dollar. The bank also sold 16,000 currency swap contracts offered at an auction today and said it would sell 10,000 more tomorrow.

``The market is very volatile; the real can rise or fall 1 percentage point in 10 minutes with no problem,'' said Ovidio Pinho Soares, currency strategist in Sao Paulo at Finabank Corretora.

The central bank also held its first auction aimed at unfreezing lines of credit for exporters, offering to lend dollars at 0.11 percentage points over the 360-day dollar London interbank offered rate, or Libor. The bank accepted Brazilian sovereign global bonds as collateral and offered up to $2 billion.

Brazil's securities regulator, or CVM, has required companies to provide details about derivatives in their third- quarter earnings after some of the nation's top firms reported more than 5 billion reais of losses on bad currency bets.

The regulatory agency may extend that requirement beyond the third quarter and impose further restrictions once it has assessed the extent of derivative losses, CVM President Maria Helena Santana said during a speech today in Sao Paulo.

``We're going through a crisis of epic proportions,'' Santana said.

'Signs of Improvement'

Policy makers are moving in the right direction, said Andre Delben Silva, a partner at Advisor Asset Management, a Sao Paulo-based firm with about 600 million reais under management.

``We are starting to see signs of improvement, and that the measures taken by the government and central bank are starting to work,'' Delben Silva said.

``As long as we start to see some reduction in volatility in global markets, and that's something we're starting to see, there is more space for the real to strengthen,'' he added.

The yield on Brazil's overnight futures contract for January 2009 delivery declined 2 basis points, or 0.02 percentage point, to 13.92 percent. The yield on Brazil's zero- coupon bond due in January 2010 was little changed at 14.81 percent, according to Banco Votorantim.

To contact the reporter on this story: Drew Benson in Buenos Aires at Abenson9@bloomberg.net