Brazil central bank intervenes in FX as real slumps across the board

By Jamie McGeever

BRASILIA, Oct 30 (Reuters) - Brazil's central bank intervened in the foreign exchange market on Friday, selling dollars to ease heavy downward pressure on the real that had pushed the local currency closer to its all-time low against the dollar struck earlier this year.

The central bank sold $787 million in the spot market as the greenback topped 5.80 reais for the first time since May, closing in on its all-time high just under 6.00 reais that month.

This follows the sale of $1 billion in the spot market on Wednesday.

Investor concerns over the fiscal outlook, coupled with the central bank's pledge to keep official interest rates anchored at their record low for some time to come, have weighed heavily on the currency and steepened the rates curve this week.

"Monetary policy is overloading the (rates) curve and the currency. On top of that there's no (fiscal) plan and agenda," said a senior trader at a bank in Sao Paulo. "It's that simple."

The central bank's action drove the real to 5.76 per dollar from above 5.81. Having slumped to a record low against sterling of 7.51 per pound, the real recovered a bit to 7.46 per pound.

The real is one of the worst-performing currencies this year, having lost more than 30% of its value against the dollar since January.

Figures on Friday showed the national debt rising to a record high above 90% of gross domestic product in September, and unemployment rising to an all-time high of 14.4% in the three months to August. .

Earlier this week the central bank kept its Selic interest rate on hold at a record low 2.00%, and surprised some analysts by maintaining its 'forward guidance' pledge to keep it low for longer, despite the growing fiscal fears.

(Reporting by Jamie McGeever; Editing by Steve Orlofsky)

Copyright © Reuters 2008. All rights reserved. Republication or redistribution of Reuters content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of Reuters. Reuters and the Reuters sphere logo are registered trademarks and trademarks of the Reuters group of companies around the world.

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.