UPDATE 3-Brazil central bank holds surprise swap auction after $1.5 billion spot sale

Recasts first paragraph, adds information on swap auction in paragraph 2

By Marcela Ayres

Aug 30 (Reuters) - Brazil's central bank on Friday sold $765 million in a surprise swap auction, after previously selling the entire $1.5 billion it offered in a spot auction that had been announced the before.

The monetary authority said in a statement that it sold 15,300 swap contracts out of the 30,000 offered in the auction, which caught markets by surprise and helped the Brazilian real pare some earlier losses.

After opening the session higher against the U.S. dollar, helped by the spot auction announcement on Thursday, the real BRBY reversed course to hit a session low of 5.69 per greenback after that auction, weakening more than 1%.

It later regained some ground and traded down around 0.3% after the unexpected swap offer. Still, year-to-date depreciation is around 14%, exerting pressure on consumer prices and challenging the fight against inflation.

Central bank chief Roberto Campos Neto, speaking at an event hosted by brokerage XP in Sao Paulo, said policymakers do make interventions based on implications over an hour.

"We look at the flow and what to be done," he emphasized, adding that the decision was based on assessing "atypical flow due to the rebalance of an index."

The statement comes amid the rebalance of the Morgan Stanley Capital International (MSCI) index, one of the main benchmarks for investors in international stock markets.

"If further interventions are , we will do so," Campos Neto said less than an hour before the unplanned swap auction.

Friday's auctions marked the second foreign exchange interventions by the central bank since President Luiz Inacio Lula da Silva took office in January 2023.

Both central bank governor and monetary policy director Gabriel Galipolo had publicly stressed that market interventions would only be made in cases of dysfunction and after collegiate debate.

Galipolo runs the foreign exchange desk and was recently by Lula to head the central bank starting year.

Fernando Bergallo, operations director at FB Capital, said the spot auction was held after a local liquidity distortion.

A second market source, speaking on condition of anonymity, that the currency's recent performance seems to have unsettled policymakers, and the end-of-month Ptax rate provided an opportunity for intervention.

The Ptax rate, calculated by the central bank based on spot market quotations, serves as a reference for settling futures contracts.

"Now that they have decided to raise interest rates, the decision to sell dollars is easier," the source said.

The central bank kept the benchmark interest rate unchanged at 10.50% in July for the second consecutive time but hardened its tone, emphasizing that it would hesitate to raise rates if .

Lula said in a radio interview earlier on Friday that if Galipolo tells him that interest rates to be raised, "that's fine."

(Reporting by Marcela Ayres and Luana Maria Benedito; Additional reporting by Fernando Cardoso: Editing by Gabriel Araujo, Jonathan Oatis and Mark Porter)

((LuanaMaria.Benedito@thomsonreuters.com; +551156447723;))