{"id":92409,"date":"2025-01-06T21:57:58","date_gmt":"2025-01-07T00:57:58","guid":{"rendered":"https:\/\/murray.adv.br\/?p=92409"},"modified":"2025-01-06T21:58:00","modified_gmt":"2025-01-07T00:58:00","slug":"brazilian-reserves-lost-33-3bn-in-december-with-central-bank-auctions","status":"publish","type":"post","link":"https:\/\/murray.adv.br\/en\/brazilian-reserves-lost-33-3bn-in-december-with-central-bank-auctions\/","title":{"rendered":"Brazilian reserves lost $33.3bn in December with Central Bank auctions"},"content":{"rendered":"\n
Monetary authority sold $21.574bn in the spot market and $11bn in line auctions<\/em><\/h6>\n\n\n\n

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01\/06\/2025<\/p>\n\n\n\n

Currency interventions conducted by Brazil\u2019s Central Bank in December decreased international reserves by $33.3 billion in one month, bringing the total to $329.7 billion by the end of 2024. At the end of November, the reserves level was $363 billion. Despite this decline, experts say the volume is still comfortable.<\/p>\n\n\n\n

The level reached at the end of last year is lower than the $355 billion recorded at the end of 2023 but higher than the $324.7 billion in 2022. These are nominal values. Silvio Campos Neto, senior economist and partner at Tend\u00eancias Consultoria, described December\u2019s drop as \u201csignificant,\u201d noting that reserves remain healthy. However, he cautioned that the rapid decline is a warning for the coming months.<\/p>\n\n\n\n

\u201cThere was a strong intervention in the foreign exchange market in December, and it was not enough to reverse the pressure, indicating that the source of this movement is not entirely related to market dysfunction or a temporary dollar scarcity; it is more structurally linked to increased risk perception about Brazil,\u201d he explained.<\/p>\n\n\n\n

In December, the monetary authority held nine spot dollar auctions and five \u201cline\u201d auctions (with a repurchase agreement), totaling $32.574 billion. That included $21.574 billion in spot sales and $11 billion in line auctions. Looking at the volume of reserves, Danilo Igliori, chief economist at Nomad, also emphasized the level is comfortable. He noted that concerns could arise if the crisis seen in December escalates in 2025. \u201cI don\u2019t think that\u2019s the scenario. It was an evident moment of stress, and the Central Bank responded well.\u201d<\/p>\n\n\n\n

Silvio Campos Neto from Tend\u00eancias explained that the interventions were the main reason for the reserve reduction but also highlighted the impact of rising market interest rates in the United States. \u201cThat also affects the value as it reduces prices, especially U.S. bonds, which make up most of the reserves.\u201d<\/p>\n\n\n\n

The Central Bank stated that there is no consensus on the best metric to define the \u201coptimal level\u201d of reserves but indicated that periodic internal evaluations show Brazil is aligned with practices of similar countries.<\/p>\n\n\n\n

In a press conference on December 19, the then-Central Bank president, Roberto Campos Neto, said the monetary authority was operating in the foreign exchange market as usual. He pointed out that the monetary authority intervenes whenever it perceives market dysfunction. Mr. Campos Neto also noted an unusually large flow at the end of 2024, with an above-average outflow of dividends as one of the reasons.<\/p>\n\n\n\n

Fiscal concerns also influenced the exchange rate\u2019s movement. At the end of November, the government announced measures that were poorly received by the market. The package was unveiled alongside a proposal to exempt those earning up to R$5,000 from income tax, which raised concerns and impacted interest rates and the exchange rate.<\/p>\n\n\n\n

The National Congress approved the fiscal project in December, while the income tax proposal has yet to be submitted by the government to Parliament. The real continued to decline, closing 2024 with a 27.3% depreciation, at R$6.18 to the dollar.<\/p>\n\n\n\n

Mr. Igliori from Nomad pointed out that December typically sees a higher dollar outflow, but the scale of the reserve drop is linked to stress regarding fiscal policy. \u201cThe auctions were significant, and yet the exchange rate moved considerably. It became clear that during December, we experienced a mini credibility crisis, and the impact on reserves was a consequence of the Central Bank\u2019s management during this period through auctions,\u201d he said.<\/p>\n\n\n\n

Another factor in the end-of-year scenario was the tone of criticism from Workers\u2019 Party\u2019s (PT) members regarding the monetary authority\u2019s actions. On the same day as Mr. Campos Neto\u2019s press conference, PT President Gleisi Hoffmann posted on social media that the real\u2019s depreciation in those weeks was a \u201cspeculative attack.\u201d<\/p>\n\n\n\n

In the press conference, the then director of monetary policy and current Central Bank president, Gabriel Gal\u00edpolo, was asked about that possibility. He argued that the idea of a \u201ccoordinated speculative attack\u201d did not represent market movements. Mr. Gal\u00edpolo stated that \u201cit\u2019s not correct\u201d to treat the market as a \u201cmonolithic block.\u201d<\/p>\n\n\n\n

The chief economist at Nomad said there is always pressure on the monetary authority and no reason to believe the new leadership will act unprofessionally. \u201cI don\u2019t see an inclination to introduce significant institutional uncertainty around the Central Bank\u2019s autonomy, which has been hard-won.\u201d<\/p>\n\n\n\n

*By\u00a0Gabriel Sinohara<\/p>\n\n\n\n

Source: Valor International<\/p>\n\n\n\n

\nhttps:\/\/valorinternational.globo.com\/\n<\/div><\/figure>\n","protected":false},"excerpt":{"rendered":"

Monetary authority sold $21.574bn in the spot market and $11bn in line auctions 01\/06\/2025 Currency interventions conducted by Brazil\u2019s Central Bank in December decreased international reserves by $33.3 billion in one month, bringing the total to $329.7 billion by the end of 2024. At the end of November, the reserves level was $363 billion. Despite […]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8106],"tags":[25752,25751],"class_list":["post-92409","post","type-post","status-publish","format-standard","hentry","category-murray-news","tag-brazilian-reserves-lost-33-3bn-in-december","tag-central-bank-auctions"],"yoast_head":"\nBrazilian reserves lost $33.3bn in December with Central Bank auctions - Murray Advogados<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/murray.adv.br\/en\/brazilian-reserves-lost-33-3bn-in-december-with-central-bank-auctions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Brazilian reserves lost $33.3bn in December with Central Bank auctions - Murray Advogados\" \/>\n<meta property=\"og:description\" content=\"Monetary authority sold $21.574bn in the spot market and $11bn in line auctions 01\/06\/2025 Currency interventions conducted by Brazil\u2019s Central Bank in December decreased international reserves by $33.3 billion in one month, bringing the total to $329.7 billion by the end of 2024. 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