The Brazilian real firmed as much as 0.6 percent before paring gains to around 0.4 percent as traders booked profit on a six-day stretch of gains.

The central bank sold $400 million worth of traditional currency swaps, which correspond to sales of dollars to investors for future delivery, to roll over June contracts.

Should it maintain that pace of sales daily throughout the end of May, as it has done in previous months, it will roll over all of the $4.4 billion worth of maturing swaps.

The move comes as the lower house of Congress prepares to vote on President Michel Temer's flagship revamp of the Brazil's costly pension system, which investors see as key to curtail growth of public debt and stave off an economic recession.

Traders say the approval may trigger additional strength in the real, which has failed to rise consistently past 3.10 to the dollar since early February. Temer said on Monday a vote could take place by late May, though he still does not have the votes to pass it at this moment.

The real's move up also tracked strength in other Latin American currencies, after weaker-than-expected US housing figures supported expectations of a slower pace of interest rate increases in the country, potentially increasing appetite for riskier emerging-market assets.

Still, yields on Brazilian interest rate futures contracts fell as traders bet the central bank could accelerate interest rate cuts this month to a brisk 1.25 percent basis points, taking the benchmark Selic rate to 10 percent.

Weaker-then-expected economic figures led economists at Banco BTG Pactual SA to forecast a 125 basis-point cut this month, followed by 100 basis-point and 75 basis-point reductions in July and September.