Reserves Management and FX Intervention

11 Pages Posted: 13 Dec 2019

See all articles by Central Bank of Brazil

Central Bank of Brazil

Government of the Federative Republic of Brazil - Central Bank of Brazil

Date Written: October 31, 2019


Over the last decade, emerging market economies have faced shocks arising from both external events and idiosyncratic factors. Brazil took advantage of benign conditions in the first decade of the century to substantially increase its foreign reserves, achieving reserves adequacy on several different criteria in the view of the IMF 2018 External Sector Report. These reserves served as macroeconomic insurance, reducing FX volatility and the risk premium during periods of market turmoil, while underpinning monetary and financial stability. In addition to accumulating reserves from interventions to “lean against” capital inflows, Brazil’s FX interventions have been designed to address liquidity shortages and excess volatility, and to provide hedging. To these ends, the Central Bank of Brazil has used instruments that range from regular spot transactions through forwards, repo lines of credit to FX swaps – or synthetic futures. The ultimate aim of these interventions is to guarantee a properly functioning FX market.

Full Publication: Reserve Management and FX Intervention

Keywords: Foreign reserves accumulation, FX intervention instruments, FX intervention motivations

JEL Classification: E5, E6, E60, H1, H12, O2, O24

Suggested Citation

Bank of Brazil, Central, Reserves Management and FX Intervention (October 31, 2019). BIS Paper No. 104e, Available at SSRN:

Central Bank of Brazil (Contact Author)

Government of the Federative Republic of Brazil - Central Bank of Brazil

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, 70074-900

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