Central Bank tries to prevent exchange rate stress with spot dollar sales and future purchases; understand

The Central Bank (BC) announced a double foreign exchange intervention for next Wednesday, the 25th, with the aim of preventing stress in the foreign exchange market. The BC will hold an auction to sell US$ 1 billion in the spot market (spot segment, that is, immediate purchase or sale transactions). At the same time, it will offer 20 thousand reverse foreign exchange swap contracts (equivalent to US$ 1 billion), which, in practice, corresponds to the purchase of future dollars.

The exchange coupon (a term that refers to the gain an investor obtains when converting and investing money in another currency) plays a relevant role in the Brazilian market and is directly related to the interest rate differential between Brazil and the United States . In simple terms, it can be defined as the difference between the interest rate in reais and the expected exchange rate variation, and is calculated based on the relationship between the price of the future dollar and the spot dollar.

"The short-term exchange coupon reflects the cost of maintaining a short-term exchange position. It tends to rise when the market starts to price in higher country risk," explains Leonardo Monoli, Investment Director at Azimut Wealth Management.

Monoli notes that the short-term exchange rate coupon had been showing signs of stress in recent days, which may have motivated the BC's action in the domestic exchange market.

According to him, this combination of auctions aims to exchange international reserves (spot dollars) for swap contracts (used to manage financial risks, such as exposure to exchange rate fluctuations), simultaneously reducing reserve and swap stocks. As a result, the impact falls on the exchange coupon, without directly affecting the level of the dollar against the real. There is also no change in the level of net reserves (the amount of dollars available).

"The coupon has been opening, but so far nothing very significant. There may have been a larger outflow of resources from the market, or there may even be outflows already mapped out by the Central Bank for the coming days," he says. "The end of the semester always brings some pressure. What draws attention is the speed with which the Central Bank decided to intervene."

He highlights that a more functional foreign exchange coupon market favors carry trade operations — a strategy in which investors raise funds in low-interest countries to invest in markets with higher interest rates.