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Central Bank spent billions of dollars to try to contain the impact on the economy due to the consequences of the expansion of the coronavirus
Since the spread of the coronavirus infection around the world, the Central Bank has injected billions of dollars in new resources into the foreign exchange market. In an attempt to contain the rise of the dollar, the Central Bank has already deposited US$15.245 billion in new resources into the foreign exchange market in March alone.
The dollar, which broke its record last week, reaching R$5, has been experiencing a period of growth worldwide as investors seek safe haven assets. The coronavirus pandemic and uncertainties in global economic growth are the driving factors behind this.
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Dollar and oil in Brazil
In early March, the international price of a barrel of oil fell significantly after oil-producing countries entered into a dispute. In Brazil, due to a turbulent political scenario regarding the tax budget, this has been another factor contributing to a more expensive dollar.
In 2020 alone, the dollar has already accumulated a 20% increase against the real. In the first two weeks of March, the US currency advanced 7.54%. This increase was only not greater due to the daily actions of the Central Bank in the market, making large interventions, many of which were not even previously announced during moments of greatest currency volatility.
This week, the Central Bank sold US$7.2 billion in cash to financial agents. This type of operation represents a direct and deep injection of resources, since the contracts do not provide for the repurchase of these amounts by the monetary authority in the future. This means that the government is spending part of its international reserves to contain the dollar. Brazil's international reserves are around US$361 billion.
Last year, the Central Bank sold US$1.4 billion in cash throughout the second half of the year to deal with currency fluctuations. However, in the last few days alone, it sold a quarter of that amount.
Swap
Another containment measure taken by the Central Bank to intersperse spot dollar sales was the negotiation of new foreign exchange swap operations. This month, US$1.4 billion were traded. This type of contract has an effect equivalent to the sale of dollars in the futures market. The dollar futures market is precisely the most liquid in the country and is the one that usually drives prices – including those of the spot dollar.