Brazil’s Real Gains as Central Bank Plans Support Currency

The Brazilian real advanced today amid the speculation the Federal Reserve and the European Central Bank are ready to meet the economic challenges and support the global recovery, while Brazil’s central bank is going to stem losses of the Brazilian currency.

The newspaper Valor Economico wrote that Brazil’s central bank thin the nation’s currency shouldn’t fall against the dollar faster than other emerging-market currencies. The central bank auctioned currency swaps contracts on September 22 to support the real, entering the derivatives market for the first time in two years. The real also followed other emerging-market currencies in a rally after Turkey and Russia increased sales of foreign-currency reserves.

The sentiment of investors improved, further boosting higher-yielding assets, as the situation in the US and Europe showed signs of improvement. The European Union finance ministers discussed the coordinated efforts to protect the banks of the region from the credit crisis. The improving labor market in the US and the hints from the Federal Reserve about a possible QE3 were other factors that boosted traders’ confidence.

USD/BRL fell to 1.8320 as of 23:08 GMT today from 1.8581 yesterday.

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