March 7, 2014
Filipe Pacheco – Bloomberg, 3/7/2014
The real declined to a one-week low a day after Brazil posted a trade deficit and foreign-exchange outflows, reducing the currency’s allure.
The currency depreciated 0.2 percent to 2.3302 per U.S. dollar at 9:48 a.m. in Sao Paulo, the biggest decline among major currencies tracked by Bloomberg after the South African rand. The real pared its weekly advance to 0.7 percent. Swap rates on contracts due in January 2017 rose four basis points, or 0.04 percentage point, to 12.41 percent, extending their increase since Feb. 28 to 15 basis points.
“The market didn’t like the trade deficit and the outflow numbers from yesterday,” Jose Carlos Amado, a foreign-exchange trader at Renascenca DTVM in Sao Paulo, said in a phone interview. “That should weaken the currency. It should get back to a lower level, around 2.34 per dollar.”
March 6, 2014
Filipe Pacheco – Bloomberg, 3/6/2014
Brazil’s swap rates climbed after the central bank said that it would be appropriate to keep adjustinginterest rates given persistent inflation.
Contracts due in January 2017 rose five basis points, or 0.05 percentage point, to 12.33 percent at 11:34 a.m. in Sao Paulo. The real advanced 0.5 percent to 2.3080 per dollar today, the strongest level on a closing basis since Dec. 10.
The central bank, which slowed the pace of interest-rate increases to 25 basis points last month after six straight half-point adjustments, said in minutes of the meeting published today that it considers “the continuation of the adjustment of monetary conditions under way” to be appropriate. Policy makers have raised borrowing costs 350 basis points since April to 10.75 percent. Consumer prices jumped 5.65 percent in the year through mid-February, above the bank’s 4.5 percent target.
“The minutes show there will be a change of 0.25 percentage point in the next meeting,” Solange Srour, the chief economist at ARX Investimentos in Rio de Janeiro, said in a phone interview. “It showed that there still are concerns regarding inflation.”
March 6, 2014
Matthew Malinwoski & Raymond Colitt – Bloomberg, 3/6/2014
Brazil’s central bank signaled today it will continue tightening monetary policy as above-target inflation remains persistent. Swap rates rose.
Policy makers led by bank President Alexandre Tombini voted unanimously on Feb. 26 to slow the pace of rate increases, raising the benchmark Selic rate to 10.75 percent from 10.5 percent after six straight half-point increases. The central bank’s monetary policy will help offset inflationary pressure from a currency depreciation, officials said in the minutes of their Feb. 25-26 meeting published online today.
The central bank considers “appropriate the continuation of the adjustment of monetary conditions under way,” according to the minutes. “Currency depreciation constitutes a source of inflationary pressure in the shorter term.”
February 26, 2014
Daniel Altman – Foreign Policy, 2/25/2014
Less than four months from now, billions of people around the world will focus on Brazil as the World Cup kicks off in São Paulo. But some Brazilians are looking forward with as much trepidation as pride, and not just because of their soccer team’s form in recent tournaments. Under the spotlight, their economy may be revealed as much less than meets the eye.
It’s easy to beat up on Brazil these days. Its currency, the real, has lost more than 15 percent of its value in the past year, as has São Paulo’s stock market, and preparations for the World Cup are not exactly on schedule. But just a few years ago, as the world reeled from economic downturns in Europe and the United States, Brazil was the darling of the financial markets. What happened?
In the years leading up to the financial crisis, Brazil had become an attractive option for investors seeking to balance their portfolios. Stock markets in Europe, the United States, and other established economies track each other so closely as to be almost identical. For example, the DAX index of the Frankfurt Stock Exchange had a correlation of 0.95 with the Standard and Poor’s 500 index on a month-to-month basis between January 2005 and August 2008. By contrast, the correlation between Brazil’s Bovespa stock market index and the S&P 500 was only 0.73. For investors who wanted to insure themselves against dips in the big markets, some of Brazil’s stocks were a reasonable option.
February 25, 2014
Blake Schmidt & Josue Leonel – Bloomberg, 2/25/2014
Brazil’s swap rates dropped for a fourth straight day on speculation that policy makers convening for a two-day meeting will limit increases in borrowing costs to a quarter-percentage point.
Swap rates on contracts due in January 2019 sank 12 basis points, or 0.12 percentage point, to 12.44 percent at 4:32 p.m. in Sao Paulo, the lowest since Nov. 22. The real depreciated less than 0.1 percent to 2.3431 per U.S. dollar.
Policy makers will raise the target lending rate by 25 basis points tomorrow to 10.75 percent, according to the median estimate of 59 economists surveyed by Bloomberg, after six straight increases of a half-percentage point. Brazil’s construction costs index rose 8 percent in February from a year earlier, the slowest pace since September, the Getulio Vargas Foundation reported.
February 21, 2014
Filipe Pacheco & Josue Leonel – Bloomberg, 2/21/2014
The real advanced, extending the biggest weekly gain in emerging markets, as Brazil reported higher-than-forecast foreign investment a day after the government pledged to reduce spending.
The currency appreciated 0.6 percent to 2.3555 per U.S. dollar at 2:26 p.m. in Sao Paulo, the strongest on a closing basis since Jan. 20. The currency was headed for a weekly increase of 1.3 percent, the biggest among 24 emerging-market currencies. Swap rates maturing in January 2016 fell eight basis points, or 0.08 percentage point, to 11.74 percent, extending their decrease since Feb. 14 to 49 basis points.
While the central bank reported that foreign direct investment declined to $5.1 billion last month, the amount was higher than the median forecast of analysts surveyed by Bloomberg, which called for $4 billion. Brazil posted a $11.6 billion deficit in the current account, the broadest measure of trade in goods and services, compared with the $11.7 billion median estimate.
February 21, 2014
Samantha Pearson – The Financial Times, 2/20/2014
Brazil has promised to cut $18.5bn in public spending, as a former star of emerging markets struggles to win back investors’ trust.
After cancelling his trip to the Group of 20 meeting in Australia this weekend, in order to finalise the country’s fiscal policy, Guido Mantega, Brazil’s finance minister, announced a new primary surplus goal of 1.9 per cent on Thursday.
To meet this target, the government will have to slash R$44bn ($18.5bn) from the budget planned for this year, relying heavily on cuts to discretionary spending in Congress.
February 18, 2014
Matthew Malinowski – Bloomberg, 2/18/2014
Brazil’s interest rate increases that pushed borrowing costs to the highest in two years have succeeded in slowing inflation, central bank President Alexandre Tombini said today. Swap rates fell.
Tombini said the full impact of the 3.25 percentage point increase to the benchmark Selic rate hasn’t fully materialized yet. The central bank will continue to keep a close eye on inflation and make sure it slows in 2014 and beyond, he said.
“Monetary policy operates with a lag. There is still impact of what we have done so far on inflation going forward,” Tombini said today about boosting the benchmark Selic rate. “We are doing our homework, fighting inflation. To a large extent, we have been successful.”
Traders reinforced bets the central bank will slow the pace of interest rate increases next week after Tombini’s comments. Swap rates on the contract due January 2015, the most traded in Sao Paulo today, reversed an earlier increase and fell 0.07 percentage point to 11.15 percent at 1:19 p.m. local time.
February 11, 2014
Blake Schmidt – Bloomberg Businessweek, 2/11/2014
Brazil’s swap rates climbed on concern policy makers will have to keep raising borrowing costs to curb inflation as the nation’s drought and heat wave contribute to higher food and energy prices.
Swap rates on contracts maturing in January 2015 rose four basis points, or 0.04 percentage point, to 11.35 percent at 12:46 p.m. in Sao Paulo, erasing earlier declines. The real depreciated 0.1 percent to 2.4120 per dollar as Federal Reserve Chairman Janet Yellen pledged to maintain the policy of scaling back in “measured steps” a U.S. stimulus program that had supported emerging markets.
Brazil’s worst drought and heat wave in decades is threatening to reduce crop yields and drive up prices. Receding levels in reservoirs may force the nation’s utilities to rely on expensive alternatives to hydroelectric power. To curb inflation, policy makers lifted the target lending rate last month by a half-percentage point for a sixth straight meeting, increasing it to 10.50 percent.
February 10, 2014
The Associated Press, 2/10/2014
When Argentina fell into the economic abyss a decade ago after defaulting on its sovereign debt, Brazil suffered right along with it, nearly following its neighbor into insolvency.
Argentina’s economy is again facing a currency plunge and inflation spike, but this time its ability to inflict economic damage on Brazil has greatly diminished.
Over the past decade, Brazil has built up its foreign reserves to $359 billion, more than nine times what it had been during the Argentine crisis of 2001-02. That means the Brazilian government has more room to take action against any dangerous currency slides resulting from Argentina’s turbulence.