The central bank narrowed the scope of a hefty tax levied on exporters that receive advance payment for the goods they sell abroad, almost completely reversing a decision it had taken in March, when it was more concerned about limiting the appreciation of the real.

According to the new rules, Brazil will no longer tax export prepayments of up to five years, a central bank spokesperson said. Before, only prepayments of up to 360 days were exempt of the 6 percent financial transaction tax known as IOF.

The real added to gains after the measure was unveiled in a central bank statement. It last traded 0.5 percent stronger at 2.1088 per dollar.

"In a low liquidity environment, if you have an expectation of exporters bringing more dollars to the country, the real will strengthen as a result," said Jankiel Santos, chief economist with BES Investimento.

The real traded below 1.8 per dollar when the central bank decided to impose the IOF tax on prepayment exports longer than 360 days, effectively curbing dollar inflows to Brazil. A member of the central bank board then said the move was aimed at averting excessive appreciation of the real. (Reuters)