Brazil's Central Bank calmed
jittery markets and slowed the free fall of the Brazilian currency
Friday by propping it up in international markets.
Currency dealers said the government-run Banco do Brasil sold
dollars to prop up the currency, the real, which closed at 1.72 to
the dollar, compared with 1.70 on Thursday. Before the devaluation,
a dollar bought just 1.21 reals.
The Central Bank declined to comment on reports it had sold
dollars through Banco do Brasil. But little else would explain the
strengthening of the real after it opened down sharply at 1.75
The real had fallen about 30 percent since last week, when the
Central Bank stopped spending dollars to support its value. Bank
President Francisco Lopes said the monetary authority would allow
the real to float but might step in to avoid exaggerated swings.
The steadier real also helped calm the Sao Paulo stock exchange,
Latin America's largest. The exchange's Bovespa index declined 2.3
percent in trading Friday. On Thursday, jitters over the plunging
real sent the Bovespa down by 4.6 percent after a euphoric
52-percent rise the four previous days.
The real's decline and the continued outflow of dollars more
than $1.7 billion since the devaluations began Jan. 12 are seen
as a sign that the financial crisis here could deepen.
The turmoil in Latin America's largest economy has raised fears
that it could spread across the continent and even affect the
On Friday, Lopes met with Finance Minister Pedro Malan and said
the government has no plans to restrict capital outflows. Markets
estimate that Brazil's currency reserves have fallen to less than
$30 billion, not including the $9 billion Brazil received under a
$41.5 billion aid package from international lenders.