Brazilian Central Bank selling foreign-exchange swap contracts
Published February 13th, 2007
The Brazilian Central Bank said late Monday that it would sell the equivalent of $450 million in foreign-exchange swap contracts at an auction Tuesday.
The bank said it would offer 9,900 reverse-swap contracts at three different maturities. The contracts on offer Tuesday will help roll over the $450 million in previously sold reverse-swap contracts that mature March 1.
The auctions allow investors to swap foreign-exchange positions for government paper linked to interest rates. The interest rate paper is considered safer and less volatile. Typically, the auctions help support the U.S. dollar against the Brazilian real by removing real exposure from the market.
The auctions were held on an almost daily basis in late 2005 and early 2006 but were suspended after a perceived lack of market interest. The central bank said that a poll of brokers revealed renewed interest in the auctions.
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