Brazil announces $55bn war chest to defend real

The Bank of Brazil said Friday it is ready to intervene heavily on currency markets from Friday, making available $55 billion to prop up the sagging real. The central bank said it will engage in so called swap operations: it will offer dollars in the futures market, with a pledge to buy them back in a determined time frame no matter what they are worth. The market tends to construe this as a bet that the dollar will not continue to rise, as the bank expects to spend fewer reales when it has to buy back the dollars as the contract matures. A bank statement said that from Monday to Thursday the bank will offer $500 million a day, and $1 billion on Fridays. The bank said it did not rule out other operations if it deemed them necessary. So far in 2013 the bank has offered $45 billion and is to inject 55 billion through the end of the year. Those $100 billion represent nearly a quarter of Brazil\'s international reserves, said the newspaper O Estado de Sao Paulo. The real has dropped 18.5 percent in value so far this year.