FX168 Financial News (Asia Pacific) News So far this year, the USD/R has risen by more than 18%, and the real has become one of the worst performing emerging currencies this year. Brazil's fiscal outlook and the US dollar soared during Donald Trump's election as US president, causing the real to continue to be sold off. The Central Bank of Brazil immediately intervened in the currency market and announced a 4 billion foreign exchange credit line auction.

(Source: Bloomberg)

According to a statement issued on Tuesday (November 12), policymakers announced an auction of up to 4 billion US dollars of foreign exchange credit lines on Wednesday. This is the first such auction since January 2023.

(Source: Bloomberg)

As early as August, the central bank intervened in the first spot sale since 2021, followed by a swap auction.

Investors are selling off the real as they question President Luiz Inacio Lula da Silva's promise to balance the budget in the face of increased government spending.

The real has depreciated by more than 16% this year, making it one of the worst performing currencies in emerging markets. The dollar surged over the past week after Trump's election last week, which only exacerbated the predicament.

Brazil's Finance Minister Fernando Haddad (Fernando Haddad) initially attempted to balance public accounts in 2024, but even after two budget freezes, the deficit at the end of the year could be close to tolerable.

His team also announced a special loan to deal with wildfires across the country, which won't increase the country's main deficit, not including interest payments.

People's growing distrust of the government's fiscal promises has dampened inflation expectations and forced the central bank to raise interest rates while the Federal Reserve relaxes its policies.

Brazil's central bank governor Roberto Campos Neto (Roberto Campos Neto) said in a recent public speech that Brazil's risk premium is not compatible with the country's fiscal reality, adding that the government needs to send a positive fiscal shock signal to change market views.

Through foreign exchange credit line auctions, the Central Bank of Brazil sells so-called spot US dollars and promises to buy them back at a certain interest rate in the near future. These initiatives seek to provide liquidity to the spot market.

As early as August, Brazil's central bank announced its first spot sale since 2021, citing the need for liquidity during the index rebalancing period.

Shortly thereafter, the bank auctioned as many as 30,000 foreign exchange swaps worth $1.5 billion.