RIO DE JANEIRO: The Brazilian real weakened o n Wednesday after the country's central bank intervened to halt four sessions of gains that drove the currency near an informal floor of 2 reais per dollar.
The bank sold $1.37 billion in reverse currency swaps as part of its efforts to curb the real's gains, which had been spurred in previous sessions by optimism about additional monetary stimulus from the European Central Bank and the US Federal Reserve.
On Wednesday, the likelihood of further gains increased after Germany's Constitutional Court approved the euro zone's new bailout fund.
The court's green light was a key requirement for the ECB's new plan to buy bonds of struggling euro members. The ruling restored hopes for a recovery of the region's economy, lifting global stock prices.
The real weakened 0.2 pct to 2.0194 per dollar after the auction, however.
Jo?o Medeiros, a partner at Pioneer Corretora de Cambio Ltda, a brokerage firm in Sao Paulo, said the Central bank reacted to the news from Germany.
"The bank is showing through its auction what we already knew, which is that we no longer have a floating currency," said Medeiros. "The market is managed by the central bank."
Since early June the government has kept the real locked within the range of 2.0-2.1 per dollar, a level it considers ideal to boost the competitiveness of the country's exporters without stoking inflation. Yet, the real traded as low as 2.0141 per dollar on Tuesday.
Elsewhere in Latin America, currencies traded mixed.
The Mexican peso weakened 0.3 percent to 13.0348 per dollar, as positive news from Europe failed to boost appetite for the country's currency further.
"The market had already embedded all of the gains that would have come with the German ruling and that is why we are seeing a bit of selling," said Enrique Alvarez, head of research for Latin America at IDEAglobal in New York.
Chile's peso strengthened 0.1 percent and the Colombian peso weakened 0.3 percent.
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