U.S. rate rises reduce room for Brazil to lower FX swaps: cenbank

[September 16, 2016]  BRASILIA (Reuters) - An impending increase in U.S. interest rates has reduced the scope for the Brazilian central bank to lower its stock of currency swaps, used to smooth over volatility in the foreign exchange market, bank chief Ilan Goldfajn said in a interview.

Ilan Goldfajn, nominated chief of the Central Bank of Brazil, speaks during a meeting at Economic Affairs Committee (CAE) of the Brazilian Federal Senate in Brasilia, Brazil, June 7, 2016. REUTERS/Adriano Machado
 

"We always said that we will reduce the swaps' stock depending on (market) conditions and those conditions are changing now," Goldfajn said late on Thursday. "The market is under pressure as we see the normalization of U.S. monetary conditions advancing."

Since he joined the bank in June, Goldfajn has more than halved the stock of currency swaps, which function like dollar sales to investors but cost taxpayers dearly when the real currency <BRL=> declines.

(Reporting by Alonso Soto, Marcela Ayres and Daniel Flynn)

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