| SAO PAULO, Sept 29
SAO PAULO, Sept 29 Brazil's central bank has
stepped up efforts to support foreign exchange liquidity as
outflows frustrate investors who bet that the policies of the
country's new government would trigger large inflows of foreign
capital, traders said on Thursday.
The central bank announced late on Wednesday it will sell as
much as $4 billion with repurchase agreements on Friday, more
than the roughly $2.4 billion worth of so-called repo contracts
expiring this month.
Though the central bank often uses that instrument to plug
short-term gaps in the supply of foreign currency, it is the
first time since March that it took steps to increase the amount
of outstanding repos.
The move came hours after weekly central bank data showed
net financial outflows of $4 billion last week, extending a
Many investors have been betting that the permanent ouster
of leftist President Dilma Rousseff last month would trigger
inflows as foreign investors were lured back to Brazil by the
new government's more business-friendly approach and its pledges
of fiscal responsibility.
"Last week's numbers caught investors by surprise and the
central bank felt the need to soothe the market," said Roberto
Campos, who helps manage 1.1 billion reais ($341 million) in
assets as a partner at São Paulo-based Absolute Investimentos.
He added that last week's outflows likely reflected
portfolio adjustments involving a move from spot-market
instruments to derivatives, rather than a flight from Brazilian
"If someone took that much money away, the real would have
slumped," he said.
Brazil's currency has strengthened over 20 percent this year
despite persistent outflows, ranking among the world's
best-performing currencies, as traders in futures markets bet
that Brazilian President Michel Temer's policies would lead to a
surge in foreign investment.
Three-month local dollar rates fell to their lowest
level in over a month following the central bank announcement,
suggesting expectations of plentiful foreign currency. That
meant the central bank had curtailed some market concerns,
according to a trader who deals directly with the central bank.
But the trader said many in the market are getting impatient
waiting for inflows and next month could be a turning point.
October marks the last month of a program granting amnesty
to Brazilians who bring undeclared foreign assets into the
"The clock is ticking and the market can only hang on for so
long," said Tarcísio Rodrigues, head of currency trading at
($1 = 3.23 Brazilian reais)
(Reporting by Bruno Federowski; Editing by Paul Simao)