Brazil central bank quadruples exposure to Chinese yuan

By Marcela Ayres

BRASILIA (Reuters) – Brazil’s central financial institution greater than quadrupled its international reserves in Chinese language yuan final 12 months, policymakers reported on Thursday, because it trimmed holdings of U.S. {dollars} and euros and constructed Brazilian reserves of foreign money from its greatest commerce companion.

The Chinese language foreign money, which till 2018 was absent from the foreign exchange reserves of Latin America’s largest economic system, rose to 4.99% of Brazilian central financial institution holdings on the finish of final 12 months, from 1.21% on the finish of 2020.

That gave it the third largest share of the central financial institution’s reserves, barely behind the euro, which fell to five.04% final 12 months from 7.85% in 2020. Greenback reserves fell to 80.34% of the full from 86.03% a 12 months earlier.

The shift underscores China’s rising financial significance to Brazil, the place it represents 28% of worldwide commerce, greater than twice america, its subsequent largest commerce companion, World Financial institution information exhibits.

Brazil additionally elevated the publicity of its reserves to different currencies – together with the Japanese yen, British pound, Canadian greenback, Australian greenback – and gold, typically used as a hedge towards different monetary property.

“In 2021, we sought better diversification within the allocation of currencies, with out prejudice to the countercyclical profile of the portfolio as an entire,” stated the central financial institution within the annual report on its international reserves.

Complete reserves rose by $6.58 billion final 12 months to $362.2 billion. Portfolio returns have been down 0.62%, the worst efficiency since 2015, primarily because of the power of the U.S. greenback towards different currencies within the portfolio.

(Reporting by Marcela Ayres; Modifying by Brad Haynes and Barbara Lewis)

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