Brazil's real ended Tuesday's session slightly weaker, but still up from the day's lows.
By late afternoon, the currency was at BRL1.8190, weaker than Monday's close of BRL1.8055, according to Tullett Prebon via Factset.
Brazil's currency weakened sharply Tuesday morning, following concerns about China's economic growth. The Asian nation cut its 2012 growth target to 7.5% from 8%. Negative comments on China from BHP Billiton (BHP, BHP.AU) and Rio Tinto (RIO, RIO.LN) also raised concerns about the pace of the slowdown.
The initial strength of the U.S. dollar versus the Brazilian real diminished during the session until Brazil's central bank called a late-afternoon auction to buy dollars, reinforcing the market's fears about goverment interventions. "The central bank probably wanted to give a sign that it was there, following the market," said Vanderlei Muniz, partner at Brazilian brokerage house Onnix.
The central bank bought dollars at a rate of BRL1.8210 at the spot market auction. The real weakened almost as soon as the auction was called.
"The market has been nervous, waiting for the Central Bank or the Finance Ministry to act at any moment to try to prevent the appreciation of the currency", says Mauriciano Cavalcanti, FX director of brokerage OM, formerly known as Ouro Minas.
While Brazil's currency market moved Tuesday on the international news, the country's National Treasury gave signs that it may take a more active role in the government's efforts to contain the real's appreciation, buying back up to $15 billion in overseas debts ahead of schedule. In a interview with Estado de S.Paulo newspaper, Treasury Secretary Arno Augustin said the government is already in talks to pay back ahead of schedule a $2.9 billion loan from the Inter-American Development Bank, or IDB.
"If the government were not intervening, the exchange rate would be now at around BRL1.50 to BRL1.60", said Muniz.
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