SAO PAULO, Nov 16 (Reuters) - The Brazilian real firmed on Wednesday as government intervention helped the currency snap a four-day losing streak triggered by U.S. President-elect Donald Trump’s surprise victory.
The real rallied as much as 1.1 percent before trimming gains to trade 0.5 percent higher at 3.42 reais, buoyed by steps taken by the central bank and the National Treasury to stanch the sell-off.
“The central bank and the Treasury are doing their best to show they’re ready to act if markets go haywire,” said Paulo Nepomuceno, head of fixed-income trading at Coinvalores brokerage.
“That is helping brighten investor sentiment after four days of panic throughout Brazilian markets,” he added.
The cost to annually insure Brazilian debt against default for five years, narrowed to 309 basis points on Wednesday from 329 basis points on Monday ahead of a local market holiday on Tuesday.
Emerging market currencies tumbled following Trump’s Nov. 8 election on concerns that his pledges of heavy infrastructure spending and tax cuts could drive the Federal Reserve to increase interest rates faster than previously expected. A rise in U.S. rates could drain funds away from higher-yielding emerging market assets.
Traders also feared a global trade shock as he has promised to review terms of trade accords the United States is part of.
The real fell 7.9 percent after the Nov. 8 election through Monday, its steepest four-day fall in five years.
The sell-off led Brazil’s central bank to step up market intervention selling almost $4 billion worth of currency swaps, which function like selling dollars to investors for future delivery, from Friday through Wednesday.
Nearly $1.5 billion of the swaps were new issues. The remaining $2.5 billion of the contracts will roll over some of the $6.5 billion in swaps maturing in December.
The bank also halted daily sales of reverse currency swaps, equivalent to future dollar purchases.
After the market close on Monday, the National Treasury announced it would also take action to stem market volatility, offering to repurchase real-denominated federal bonds between Wednesday and Friday and halting the auction of new bonds this week.
The Treasury repurchased 445,300 fixed-rate coupon-bearing reais bonds known as NTN-Fs on Wednesday, out of a total offer of 1 million bonds.
Yields on fixed-rate bonds and rate future contracts <0#2DIJ:> fell after widening sharply over the last four trading days.
Reporting by Bruno Federowski; Editing by W Simon