By Ben Tavener
SAO PAULO
The Brazilian real made modest gains Wednesday after the central bank said it would significantly increase its interventions on the foreign exchange market.
The move comes after the real plunged to a seven-month low of 2.408 against the U.S. dollar, the first time the currency had broken through the 2.40 mark since Feb.12, when it closed at 2.423.
The real strengthened to 2.399 just after 2 p.m. São Paulo time on Wednesday, after weakening to 2.417 earlier in the day.
The Brazilian currency has slumped 7 percent since the beginning of the month, when a dollar bought 2.246 reais.
Brazil's central bank is set to begin stepping up rollovers of dollar swaps Wednesday, increasing the quantity of swap contracts offered at daily auction from 6,000 to 15,000. The move is the equivalent of increasing of the value of the future market dollar sales from $300 million to $750 million.
The monetary authority said it would also continue operating a daily sales intervention program of around $200 million in swap contracts that started last year.
This combined offer of $950 million of swap contracts will remain in place until the end of the month, according to the Folha de S.Paulo newspaper.
The real has struggled recently after a number of election polls showed President Dilma Rousseff, who is vying for a second term in office, was performing better, clawing votes back from main rival Marina Silva, who surged in the polls after her dramatic late entry into the race following the death of Eduardo Campos, the Socialist Party's original candidate.
Most recent polls have shown that although Rousseff is leading comfortably in the first round, a simulated second-round vote between Rousseff and Silva is a technical tie, with one poll predicting Rousseff would win the likely runoff, which will be held on Oct. 26 if no candidate musters 50 percent of Oct. 5 vote.
Business figures have grudgingly backed Silva after the market favorite, center-of-right Social Democracy Party candidate Aécio Neves, was projected to be eliminated in the first round.
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