(Bloomberg) -- Brazil’s central bank announced it would sell as much as $3 billion in a spot auction on Thursday, its fourth such intervention this week amid a massive currency selloff.
The announcement on Wednesday evening followed a 3% slump in the real, as investors rush to dump the currency on the back of growing concerns around the country’s debt trajectory. Prices of the auction will be based on the so-called PTAX rate, which is the official fixing for the currency, the central bank said.
A strong capital outflow prompted the central bank to step into the market for three straight days in mid-December, when it sold about $6 billion in the spot market while also auctioning credit lines. The move failed to alleviate pressure on real. The currency is down almost 23% this year, the worst in emerging markets, amid deepening skepticism of President Luiz Inacio Lula da Silva’s efforts to shore up public accounts.
Central bankers are concerned about the impacts a weaker currency could have on consumer prices, and inflation estimates remain above their 3% goal for the foreseeable future.
Policymakers led by Roberto Campos Neto raised interest rates by a full percentage point to 12.25% this month while pledging two additional hikes of similar magnitude by March. Board members said they will “closely” monitor the FX pass through to prices, as their inflation fight becomes “more adverse.”
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