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To: Cynic 2005 who wrote (9539)	10/27/1998 1:37:00 PM
From: Cynic 2005	Read Replies (2) \| Respond to of 86076

Dow Jones Newswires -- October 27, 1998 Brazil Ctrl Bk: No Changes In Exchange Rate Policy-Estado Dow Jones Newswires SAO PAULO -- Amid market rumors that Brazil is set to devalue its currency, the central bank on Tuesday said it has no plans to alter its foreign exchange policy, the Estado news agency reported. Central Bank International Affairs Director Demosthenes Madureira Pinho Neto confirmed to Dow Jones Newswires through a spokesman that he sought to "squash rumors that have circulated Tuesday, mostly generated by the international press" and that no exchange rate changes are imminent. Brazil has a long-standing policy of promoting mini- devaluations of the real every two to five working days. The policy results in an annual devaluation of around 7%. Talk mounted that Brazil planned to devalue its currency after two large U.S. investment banks were seen selling a total of 2,000 contracts in the November real futures contract Tuesday mid-morning. Market participants and analysts were also quick to dispel speculation that a devaluation would accompany the fiscal austerity measures slated to be unveiled later Tuesday by President Fernando Henrique Cardoso. "We are confident that there is no truth to the rumor. We've talked to U.S. banks and to the IMF (International Monetary Fund) and no one believes that it going to be part of the fiscal package," said Pravin Banker, a portfolio manager at King Capital Limited said. Meanwhile, demonstrating how sensitive investors are, the head of Citigroup's Latin American research sent an e-mail shortly after the rumor hit the Street, detailing why such a move was unlikely. "Market rumors are suggesting a 10% devaluation is imminent in Brazil. We deem this as highly unlikely," wrote Joe Petry. Petry said that Brazil's fiscal problem would be complicated rather than helped by a devaluation. "The structure of Brazil's public domestic debt would be greatly worsened as the exchange rate uncertainty would likely lead to increased interest rates with negative consequences for the $51 billion reals in domestic dollar-indexed debt," he said. Petry added that the $230 billion external debt of Brazil would also be negatively impacted by a devaluation of the country's currency. "Brazilian policy authorities are well aware of these calculations," the Citigroup economist said.