UPDATE 2-Brazil central bank ready to act to halt currency meltdown

jueves 24 de septiembre de 2015 14:48 GYT

(Adds currency movement, analyst comment)

By Alonso Soto

BRASILIA, Sept 24 (Reuters) - The Brazilian central bank warned on Thursday it is ready to use all instruments in its arsenal to curtail the collapse of the country's currency as investors fret over the future of Latin America's largest economy.

In a rare appearance at the quarterly inflation report news conference, central bank chief Alexandre Tombini did not rule out selling part of the country's $371 billion foreign reserves to calm the foreign exchange market.

Growing political turmoil that threatens to unseat President Dilma Rousseff and a deepening economic recession have dragged Brazil's real to its weakest level since the currency was created in 1994.

"In this process (to tame volatility), all instruments are available for the central bank," Tombini said. "Foreign reserves are an insurance that could and should be used."

The real bounced after Tombini's warnings, erasing losses and strengthening as much as 2 percent earlier on Thursday. The real later trimmed some of those gains to trade up 1 percent at 4.10 per dollar.

On Wednesday, the central bank failed to tamper foreign exchange volatility with renewed sales of currency swaps and dollars with repurchase agreements.

Markets question Rousseff's capacity to push through Congress a new fiscal adjustment package to shore up the country's finances and avoid more credit rating downgrades.   Continuación...