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Brazil’s central bank has not established an informal trading band for the country’s currency, the Brazilian Real, but will intervene in the market if the exchange rate reaches levels it deems unreasonable.

Speaking before the joint congressional budget committee, Central Bank President Alexandre Tombini said Thursday that recent weakening of the real was due chiefly to seasonal demand for dollars. He said the institution reserves the right to intervene in the market but will tend to do so only to curb strong shifts in currency levels.

“We don’t have any formal or informal band for the currency,” he said. But he added, “We’ve said that we’re taking precautions so that Brazil isn’t a location for devaluation of important currencies like the dollar.”

In practice the USD in recent weeks has appreciated against the BRL.

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From late June through late October, the real traded in a narrow band of BRL 2.02 to BRL 2.05 to-the-USD. But over the past 4 weeks, the real depreciated to nearly BRL 2.10 to the USD.

According to many analysts, the depreciation may be due, in large part, to an increase in imports of consumer goods and even some perishables ahead of the Christmas season as well as year-end profit remittances by multinational companies.

Regarding intervention, Mr. Tombini noted that the central bank currently holds some $5-B in net “Long” USD positions in Fx swap contracts, hinting that the bank has the firepower to curb any abrupt currency movements. The swap contracts expire between early December and early January.

Over the years, the central bank has used swap contracts frequently as a tool for moderating strong shifts in the foreign-exchange rate.

Mr. Tombini said that the pass-through effect on inflation from the recent currency depreciation was likely to be less significant than in the past.

Meanwhile, Brazil’s economy is likely to continue a nascent recovery, he told committee members. Brazil’s economy, he said, was showing signs of “an intensifying recovery in the fourth quarter” that should extend into next year.

He noted that some US$7.7-B in foreign direct investment flowed into the economy in October alone.

The consensus figure for Brazilian Y 2012 economic growth is 1.5%. Growth was 2.7% in Y 2011.

Mr. Tombini said Y 2012 growth was dragged down by a 1-H performance. He said recent data suggest that the Q-4 will see growth at an annualized pace of about 4.7%. “This will carry over to Y 2013,” he added.

However, global economic conditions may continue to drag on Brazil’s growth prospects.

“The international scenario is subject to lower growth than the historical average,” he said. “It’s still being affected by the international economic crisis that has generated a fiscal drag for important economies.”

Although inflation is running at about 5.6%, Mr. Tombini said price pressures were likely to decline in the coming months, with the inflation rate falling gradually toward the government’s 4.5% target, although “in non-linear fashion.”

He added that the central bank will remain “vigilant” on inflation.

“The central bank rate committee has agreed that maintenance of the Selic [base interest rate] for a sufficiently long period of time will help bring inflation toward the target,” he said.

Brazil’s benchmark Selic rate has fallen by more than five percentage points since mid-Y 2011 and currently stands at a record low of 7.25%