Brazil's central bank offers dollar liquidity after outflows
By Bruno Federowski
SAO PAULO, Sept 29 (Reuters) - 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 four-month streak.
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 markets.
"If someone took that much money away, the real would have slumped," he said. Continuación...