UPDATE 1-Brazil to act to limit crisis impact-cenbank head

Mon Jan 19, 2009 9:17am EST
(Recasts; adds currency performance, additional comments)
BRASILIA, Jan 19 (Reuters) - Brazil is well-positioned to deal with a global financial crisis and will do what it takes to limit its impact on Latin America's largest economy, Central Bank President Henrique Meirelles said on Monday.
"It's a serious moment, a grave moment ... But on the other hand, the country is well positioned to deal with the crisis," Meirelles said at a ceremony in Brasilia celebrating 10 years of the country's floating exchange rate regime.
The government has repeatedly said Brazil is better placed than many to confront the crisis pointing to the country's economic fundamentals and more than $200 billion worth of international reserves.
Meirelles said well-established rules governing local financial markets have also helped. He said central bank interventions in the foreign exchange market will continue.
Brazil's currency, the real BRBY, sank 23.8 percent in 2008, its first annual decline since President Luiz Inacio Lula da Silva took office in 2003, as investors dumped emerging market assets.
The central bank has sold dollars from its international reserves on the spot foreign exchange market, currency swaps and dollar repurchase agreements in a bid to slow the currency's depreciation. Brazil's reserves stood at $205.4 billion last week.
"To allow the currency to freely float ... doesn't mean to stay on the sidelines when the market becomes dysfunctional," he said. "Our focus in recent times has been to improve how the market functions, not to substitute it." (Reporting by Ana Nicolaci da Costa, Writing by Elzio Barreto)