Brazil FX dynamics improving, market more balanced -central bank director

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BRASILIA — The dynamics driving Brazil’s currency are improving and the market is now more balanced, despite lingering fiscal uncertainty, central bank monetary policy director Bruno Serra said on Thursday.

In an online debate hosted by event management company Consulting House, Serra said the central bank’s market interventions earlier this year have helped greatly, while the capital flows picture for the real is also brighter.

“The trend for the foreign exchange market is for a much better flow in 2021 and 2022 than 2019 and 2020,” Serra said, noting the $9 billion FX inflow in the first quarter of this year was the highest since 2012.

Since the central bank’s flurry of dollar-selling FX intervention earlier this year to tackle market dysfunction and volatility, in part sparked by rising U.S. bond yields, the market’s dynamics have improved “a lot,” Serra said.

“Even with this recent uncertainty surrounding the (2021) budget, the FX market has been balanced. Whoever wants to buy (dollars) has found a seller, which is very good. It’s always good that the market adjusts by itself,” Serra said.

The central bank has also sold over $8 billion in FX swaps contracts and $6.6 billion from its FX reserves on the spot market this year. Its last intervention was in mid-March.

The real fell as low as 5.88 per dollar in early March, close to last May’s record low 5.97 per dollar. On Thursday it registered its strongest close in over two weeks at 5.5734 per dollar.

Earlier on Thursday, Economy Minister Paulo Guedes said the real’s equilibrium rate is probably around 4.50 per dollar, adding he expects the currency to strengthen in the coming months, having overshot to the downside.

($1 = 5.57 reais) (Reporting by Gabriel Ponte and Jamie McGeever Editing by Chris Reese)