Brazilian Real, Bovespa Recuperating After Central Bank Intervention

Last week was particularly turbulent for Brazil: the real lost 6.7 percent, while the Sao Paulo Stock Exchange fell roughly 1.4 percent. Year-to-date, the currency is down more than 30 percent, mainly driven by concerns over the Fed rate hike and the sluggishness in the Chinese economy.

Both these figures rose on Monday after the Brazilian Central Bank announced it would intervene to sell three billion U.S. dollars from its international reserves in the market to stop the decline of the country’s currency, which hit a 13-year low last week. The institution said it plans to buy back all of the $3 billion by the end of November of 2015.

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The Brazilian real was up 0.61 percent on Tuesday, to 0.2621 U.S. dollars, while the Sao Paulo Stock Exchange was up 0.59 percent to 46,772.92 Bovespa IBOV index points.

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The Central Bank’s intervention finds precedent in another similar sale that took place in December of last year, when it sold two billion U.S. dollars in the market.

Spanish-language site Ambito explains that, “the goal is offering dollars to banks and companies that face difficulties to obtain then in Brazil, which puts further pressure on the depreciation of the Real.”

On top of this exceptional move, the Central Bank periodically offers contracts on the future Dollar, “without compromising the reserves, to satisfy the market’s need for the U.S. currency and to stop the fall of the Real.”

Several U.S.-listed Brazilian stocks, including Petroleo Brasileiro Petrobras SA (ADR) PBR, were up on Tuesday.