Brazil's real extends gains, but slips on cenbank
Brazil's currency on Wednesday extended a strengthening trend, hitting its best level for the year, before the government said it would buy back $3.0 billion on the spot market to pay down foreign debt.
The real gained 0.26 percent to 2.737 per U.S. dollar in early trade after opening at 2.735 and again rising to its strongest level in two-and-a-half years.
However, the real weakened 0.40 percent to 2.755 reais per dollar after the central bank said the government was boosting plans to buy dollars, ending weeks of speculation about a potential intervention as traders remained confused about the reasons behind the government's move.
The central bank said it would buy dollars to pay off debt maturing in Dec. 2004 and June 2005. The Treasury has already bought about $500 million of the $3.0 billion, traders said.The central bank denied the government was intervening to keep exports competitive or to target the exchange rate, but that did not convince traders.
"What was surprising was that they announced it instead of doing it quietly. This caused some stress in the market," Carlos Cintra, head of fixed income at Banco Prosper in Rio de Janeiro, said."People are trying to understand if this is a message they aren't happy with the exchange rate or if it's just about debt management."
Meanwhile, the Bovespa index of the Sao Paulo Stock Exchange rose 0.48 percent to 24,527 points as it struggled to hang onto gains that allowed it to hit its highest closing level ever on Monday.
(From Reuters, November 24, 2004)
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