The Brazilian Central Bank announced on Thursday, October 16, further measures to ensure liquidity and support the real, Brazil's currency, the real. The bank expanded the list of securities it will accept to free up reserve requirements on term deposits and took new measures to ensure that banks that borrow from its discount window provide credit lines to exporters
The real closed up 0.2% at 2.16 per dollar after the central bank sold one billion in dollar repurchase agreements and sold 1.814 billion of 2.5 billion in dollar swap contracts on offer in an auction on Thursday.
The Bovespa stock market index ended trading on Thursday down 1.06% at 36,441.72 points after slumping 7%. Bovespa followed the Wall Street 4.6% rally as investors snapped up beaten-down shares following on the worst day since the 1987 stock market crash.
Shares of government managed Petrobras oil company sank 7.5% and mining company Vale do Rio Doce, which is taking a hit from a sharp decline in industrial metals prices, fell 2.1%.
Meanwhile Latin America's second largest economy. Mexico. stepped up intervention in the foreign-exchange market, helping the peso post gains, an hour after central bank Governor Guillermo Ortiz said policy makers were looking to pare back their purchases of the currency.
Banco de Mexico bought 1.9 billion US dollars worth of pesos, up from 400 million on Wednesday. The bank has now purchased 11.2 billion US dollars worth of pesos, depleting its near-record foreign reserves, since the currency tumbled to a record low last week amid the worst global credit crisis since the Great Depression.
The peso finally rose 2.4% to 12.8343 per dollar after having plunged as much as 4.2% before the central bank stepped into the market. The currency has dropped 23% since it reached a six-year high last August as the financial crisis prompted investors to pull money out of higher-yielding, developing-nation assets.
Banco de Mexico may stop using its foreign reserves to prop up the peso soon, Ortiz said in an interview on Televisa network Thursday. He said new peso purchases wouldn't be as large as last week's interventions.
The bank bought 6.4 billion US dollars worth of pesos on October 10 alone. It said on October 14 that reserves had fallen to a one-year low of 75 billion. Reserves stood at a record 86.9 billion US dollars on July 18, up 52% from three years earlier boosted by exports of oil.