(Bloomberg) -- Brazil’s central bank stepped into currency markets amid a selloff driven by the nation’s deteriorating fiscal outlook.
The real, which was hovering near a session low before the announcement, quickly trimmed losses after the statement. It was down just 0.4% against the dollar as of 2:52 p.m. in Sao Paulo, no longer the worst performing among emerging currencies on Friday.
The currency has sank to a record low this year amid persistent concerns about the nation’s budget deficit.
The last time the central bank intervened with a spot auction was in August, when it sold as much as $1.5 billion dollars. That move also followed a plunge driven by market concerns over mounting deficits, with the monetary authority also justifying it as a way to offset the impact of MSCI Inc. index’s re-balancing on Sept. 2.
“That’s a band-aid for a broken leg,” said Brendan McKenna, an emerging-markets economist and foreign-exchange strategist at Wells Fargo Securities LLC in New York. “The fiscal is driving the FX.”
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