Brazil move to check foreign exchange slide unlikely soon

Brazil's central bank is unlikely to act soon to limit a slide in the real that has seen the Brazilian currency fall to its weakest in 13 months. Capital flows to the country are strong and the economy is more stable than it was when the central bank last intervened to prop up the real by selling dollars at auction, during the 2008-2009 US banking crisis and world recession.
Central bank dollar sales remain unlikely despite the real's 13.6 percent decline this month, which has helped reverse one of the world's biggest currency gains into one of its biggest losses.
The currency has lost more than 9 percent year-to-date against the dollar after erasing a nearly 8 percent gain from January though July 26, when the real hit a 12-year high of 1.5275 per dollar.
With the real now trading at about 1.83 per dollar, market players speculate the central bank will wait until the currency weakens much further before stepping in to buy the Brazilian currency in order to support it.
Some see the central bank comfortable with the real weakening to 1.90 reais per dollar or others to 2 reais per dollar since this would help manufacturers who have complained a strong real has dented their competitive edge abroad.
"We don't see the possibility of intervention now," said Mario Battistel, head of currency trading at Fair Corretora, a Sao Paulo currency brokerage, when asked if the central bank would step in to curb the real's slide.
"When people say the central bank will sell dollars, they imagine that the real is very weak - when the true consensus is that the real is strong," he said.
The last time the central bank began selling dollars to halt a plunge in the real was in Oct. 8, 2008, when the currency had lost more than a third of its value in two months and it was trading as weak as 2.44 per dollar. On Wednesday, the real weakened more than 3 percent in afternoon trading to 1.8515 to the dollar.
From May of 2009 until September 13 this year - with only short breaks of a day or two - the central bank had been buying dollars as much as twice a day at auction to limit gains by the real. From its December 2009, post-US crisis lows of 2.619, the real gained over 50 percent through September 2011.