November 18, 2013
Francisco Marcelino – Bloomberg, 11/17/2013
Brazil’s central bank President Alexandre Tombini didn’t see any shortage of foreign currency in the country’s spot market in the week the real declined to a two-month low.
The nation and other emerging markets face a “sell-off” because of “interest rate normalization” in advanced economies, Tombini said in a speech delivered in Santiago on the evening of Nov. 15 and published on the Central Bank of Brazil’s website yesterday. The world’s second-biggest emerging economy after China is “providing currency hedge for the private sector” with an $100-billion intervention program for 2013, Tombini said.
Brazil’s real has fallen 5 percent since Oct. 31, when the government said its budget deficit widened to the largest in almost four years on concern about a credit rating downgrade. On Nov. 13, the currency dropped to 2.3341 per dollar, the weakest since Sept. 4.
September 17, 2013
Blake Schmidt – Bloomberg, 09/17/2013
Brazil’s real climbed for the first time in three days as the central bank prepared to roll over foreign-exchange swap contracts to support the currency in an effort to curb inflation.
The real appreciated 0.5 percent to 2.2721 per U.S. dollar at 9:55 a.m. in Sao Paulo, the strongest level on a closing basis since Aug. 9. Swap rates on contracts maturing in January 2015 declined three basis points, or 0.03 percentage point, to 10.41 percent.
The currency has rallied 7.3 percent since Aug. 22, when the central bank announced a $60 billion intervention program of currency swaps and foreign-exchange credit lines through the end of the year. Today’s rollover of currency swaps is in addition to an auction of new contracts.
September 16, 2013
Brazil’s central bank sold the equivalent of $1.96 billion in foreign-currency swap contracts Monday in an auction to roll over several blocks of contracts coming due in October.
The bank had offered to roll over up to $2 billion in the auction, one of three it plans to hold this week to allow investors the opportunity to extend swaps that will otherwise come due Oct. 1.
The central bank will hold similar auctions Tuesday and Wednesday, offering to roll over $6.8 billion in swap contracts in addition to the $500 million offered as part of a daily intervention program launched last month.
September 3, 2013
Blake Schmidt & Josue Leonel – Bloomberg, 09/02/2013
Brazil’s real strengthened for the first time in three days after central bank president Alexandre Tombini said he is ready to provide liquidity as needed to reduce volatility.
The currency rose 0.3 percent to 2.3774 per U.S. dollar. Swap rates due in January 2015 declined two basis points, or 0.02 percentage point, to 10.51 percent.
Brazil has a “cushion” of more than $370 billion in international reserves allowing it to provide a hedge to the market, Tombini said at an event Aug. 31. The central bank sold foreign-exchange swap contracts worth $1.49 billion today to support the real in two auctions, one of which was in addition to the $60 billion intervention program.
August 29, 2013
Joe Leahy – The Financial Times, 08/29/2013
Carlos Piassi remembers the reaction from other farmers when he started planting a second annual crop at his farm near Uberlândia, in Brazil’s grain belt.
No one believed it could be done given the semi-arid region’s relatively short rainy season and long dry winter.
“If you had said you were going to plant a safrinha [the small harvest] here five years ago you were called crazy,” he says at his farm, Fazenda Campo Alegre. The naysayers were wrong. “The safrinha between last year and this has about tripled,” he said.
August 22, 2013
Jeffrey T. Lewis – The Wall Street Journal, 08/21/2013
Central banks in some key emerging markets have burned through billions of dollars in recent weeks as they try to prevent their currencies from plunging in value against the dollar, but Brazil’s monetary authority has barely had to spend a dime, by acting in the futures market instead of the spot market.
From India to Turkey and beyond, central banks have intervened to prop up their currencies as dollars flow back to the U.S. in anticipation of a gradual end to the Fed’s easy money policy–often compounded by troubles in the domestic economy.
In Brazil, the real has reached four-year lows against the dollar, as the local economy has remained weak, inflation high, and confidence in President Dilma Rousseff’s ability to fix the situation has ebbed.
August 22, 2013
Matthew Malinowski & Raymond Colitt – Bloomberg, 08/21/2013
Brazilian President Dilma Rousseff is meeting with central bank President Alexandre Tombini and Finance Minister Guido Mantega today to discuss the weakening real, according to a government official.
The official requested not to be named because he isn’t authorized to comment on the issue publicly.
Tombini also will skip this week’s meeting of the world’s top monetary policy makers in Jackson Hole, Wyoming and will remain in Brazil to monitor markets, said a central bank spokeswoman who couldn’t be identified in line with bank policy. Tombini had been scheduled to attend the Aug. 22-24 gathering, according to a version of his agenda published on the central bank website last week.
August 20, 2013
Bruno Federwoski – Reuters, 08/19/2013
Brazil’s Finance Minister Guido Mantega advised investors on Monday to avoid big bets against the real, saying they could lose money if the currency recovers from recent weakness.
He said the foreign exchange market has been under a lot of stress as U.S. Treasury yields rise, but said the situation in Brazil is “under control,” with dollars flowing into the country’s stock market and through foreign direct investment.
“Today we had a stressful situation originating mostly in the United States. There was an increase in speculation and investors migrated to short-dated bonds from long-dated bonds,” he told reporters in Sao Paulo, referring to a sell-off in Brazil’s currency and debt markets.
August 19, 2013
Kenneth Rapoza – Forbes, 08/19/2013
The bear case is building for Brazil. Ever since the market got a better sense of Fed tapering this summer, investors have been selling bonds and emerging market assets. Brazil, a favorite for yield hungry investors, has been no exception.
Brazil’s sovereign debt doesn’t yield enough to keep investors all that interested. The 10 year Brazil 2023s yields a nice 4.54%, but 10 year Treasury bonds are yielding 2.85% and no longer come with the risk of a credit downgrade. Not so in Brazil. Last week, Barclays Capital suggested the country could go BBB-, teetering on losing its investment grade status in 2014.
Local currency debt in Brazil pays a higher yield. And those rates are expected to go higher this year. That means investors holding those local currency bonds today will see their bond values decline. The local currency, the real, is also weaker than when they first bought those bonds. Barclays expects the real to weaken to an average R$2.45 within a year. The real is currently trading at R$2.40. It was R$2.35 on Friday.