Aussie overvalued, Brazil won’t let real rise, O’Neill rays

Yoshiaki Nohara & Masaaki Iwamoto – Bloomberg, 04/18/0213

Australia’s currency is overvalued and Brasil’s weak economy means it won’t allow the real to appreciate, according to Goldman Sachs Asset Management Chairman Jim O’Neill.

“The currency I find the most interesting is the Australian dollar,” O’Neill, 56, said at a Goldman Sachs seminar in Tokyo today. “The Australian dollar is significantly overvalued.”

O’Neil said it is “easy to dislike every major currency.”Read more…

Brazil yields to traders pouncing on gains: currencies

Joseph Ciolli & Ye Xie – Bloomberg, 03/14/2013

Efforts by Brazil to tame inflation are providing foreign-exchange traders with the biggest returns in the world by purchasing reais with funds borrowed in dollars.

Investing in real forward contracts funded by the greenback has gained 5.3 percent this year, the most of any of the 44 other currencies tracked by Bloomberg. Wagers that Brazil’s currency will rise outpaced those expecting a decline by an average of $5.6 billion this year, data from the Sao Paulo-based BM&F exchange and compiled by Bloomberg show. As recently as September there were net bets against the real.

Finance Minister Guido Mantega, who popularized the term “currency war” in 2010, told Bloomberg News last month he’s abandoning the strategy that drove the real down 19 percent in two years as the government shifts its focus to containing inflation. The central bank signaled on March 6 that it’s ready to raise interest rates from a record low 7.25 percent after dropping a pledge to hold borrowing costs steady for what it had called “a prolonged period of time.”

Read more…

Brazil swap rates rise as inflation accelerates; real advances

Bloomberg – Gabrielle Coppolla & Josue Leonel, 03/08/2012

Brazil`s swap rates climbed to a eight-month high as a report showed annual inflation accelerated in February, fueling speculation the central bank will lift borrowing costs this year.

The real rallied to its highest level since May on speculation the central bank will let the currency appreciate to contain inflation. The government’s IPCA index of consumer prices climbed 6.31 percent in February from a year earlier, the highest annual rate in 14 months. The median forecast of economists surveyed by Bloomberg was for a 6.20 percent pace.

“IPCA has been surprising the market, and it shows that there’s a significant inflation risk,” Roberto Padovani, the chief economist at Votorantim CTVM in Sao Paulo, said in an telephone interview. “The increase may prompt the central bank to raise rates in April.”

Read more…

Brazil bank prioritizes inflation fight

Erin McCarthy, Brian Baskin – The Wall Street Journal, 02/24/2013

The Brazilian central bank’s priority is fighting inflation, and not spurring growth, its president said in an interview before policy makers meet to set interest rates, even as Latin American’s biggest economy struggles to escape a long stretch of slow growth.

Brazil’s economy expanded around 1% in 2012, down from 7.5% as recently as 2010. At the same time, annualized inflation hit 6.2% in mid-February, close to the maximum the government has said it would tolerate.

Analysts say the perception of dueling policies aimed at stimulating the economy and tamping down inflation have created confusion in the market, causing the Brazilian real to gyrate from multi-month lows to highs in the space of a few months.

Read more…

Brazil’s FDI covers current account shortfalls in 2012

Reuters, 01/23/2013

Foreign direct investment in Brazil more than covered the country’s current account deficit in 2012, the central bank said on Wednesday, in a sign of continued confidence in Latin America’s largest economy despite sluggish growth.

Brazil attracted $65.272 billion in foreign direct investment in 2012, above a central bank estimate of $63 billion that was revised upward several times last year. The country drew $66.6 billion of FDI in 2011.

That investment fully covers a current account deficit of $54.246 billion last year — more than the bank’s forecast of $52.5 billion.

Read more…

Wrong numbers

The Economist , 01/19/2013

For Brazilians, disappointing economic news just keeps coming. After weak third-quarter GDP figures shocked market economists and government at the end of November, both cut their predictions for growth in 2012 to just 1%. Then the government admitted it would only hit its closely watched target for the primary fiscal surplus—of 3.1% of GDP—by omitting some infrastructure spending from the sums, bringing forward dividends from state-owned firms and raiding the sovereign wealth-fund it set up in 2008. Now inflation figures have brought more gloom. During 2012 prices rose by 5.84%—above market expectations, and, for the third year running, close to the ceiling of the range (2.5-6.5%) targeted by the Central Bank.

In fact, the headline figure underestimates inflationary pressures. If the federal government had not capped petrol prices, and municipalities frozen public-transport fares before October’s local elections, last year’s figure would have been closer to 6.5%. In 2013 both those prices are likely to rise. The end of a sales-tax holiday for cars will boost inflation, too. Most analysts now think that inflation will be around 6% this year. Week by week, they are revising down their forecasts for economic growth in 2013, now at about 3%.

The government’s response to the bad news stoked fears that Brazil may be in for a long spell of high inflation and low growth. Stung by criticism, Dilma Rousseff, the president, pointed out that Brazil is still growing faster than Europe. That is true, but hardly a very illustrious comparison: most other emerging economies, including in Latin America, are doing far better.

Read more…

Why Brazil’s once-booming economy is losing its shine

Catherine Boyle – CNBC, 01/16/2013

Brazil, long viewed as one of the most promising emerging markets, has seen its crown slip slightly in recent months. The country has been enshrined as Latin America’s economic powerhouse for more than a decade, fuelled by vast resource wealth and investment from China.

Yet its dominance is under threat as other emerging markets compete fiercely on cost.

“The last decade was very good for Brazil,” James Lockhart Smith, head of Latin America, Maplecroft, told CNBC.

Read more…

Brazil’s inflation problem

Sujata Rao – Reuters, 01/16/2013

When will Brazil’s central bank admit it has an inflation problem? Markets will be watching today’s rate-setting meeting for clues.

There is no doubt about the outcome of today’s meeting at the Banco Central do Brasil (BCB) — no one expects it to do anything but leave interest rates steady at the current 7.25 percent. But the BCB has been focused on growth for 18 months and has cut interest rates by 525 basis points in this time, its actions helping to drive the real 10 percent lower last year versus the dollar. The government meanwhile has unleashed huge doses of fiscal stimulus. The result, rather than a growth recovery, is a steady rise in inflation.

Goldman Sachs’ Latin America economist Alberto Ramos points out that Brazilian inflation came in above the 4.5 percent target for the third straight year in 2012 and the balance of inflation risks has deteriorated. Gasoline prices are to rise from next week and drought is making hydro-power generation more costly. Analysts polled by Reuters expect 2013 price growth at 5.53 percent. Ramos writes:

Read more…

Brazil analysts cut 2013 GDP forecast, raise inflation call

David Biller – Bloomberg Businessweek, 01/07/2013

Analysts covering Brazil lowered their forecast for growth this year and raised it for inflation, as the world’s second-biggest emerging market struggles to rebound from a slowdown that has lasted more than a year.

Brazil’s gross domestic product will expand 3.26 percent this year, according to the median estimate in a central bank survey of about 100 analysts published today, down from 3.3 percent the previous week. Inflation this year will reach 5.49 percent, up from the previous week’s estimate of 5.47 percent. Economists also boosted their 2012 inflation forecast for the fifth straight week to 5.73 percent from the previous estimate of 5.71 percent, the survey showed.

President Dilma Rousseff’s administration has injected a series of stimuli into Brazil’s $2.5 trillion economy, which economists forecast will grow this year the slowest among the BRIC group, which includes Russia, India and China. Meanwhile the central bank has cut the benchmark Selic rate by 525 basis points, the most of any Group of 20 nation, to a record 7.25 percent.

Read more…

Brazil’s swap rates rise as unemployment rate falls; real drops

Blake Schmidt – Bloomberg, 12/21/2012

Brazil’s swap rates rose for a fourth day after the unemployment rate dropped to a record low for the month of November, fueling speculation that the central bank will raise borrowing costs to control inflation.

Swap rates due in January 2015 climbed six basis points, or 0.06 percentage point, to 7.88 percent at 10:25 a.m. in Sao Paulo, extending its weekly increase to 25 basis points, the biggest since the five days ended May 25. The currency depreciated 0.2 percent to 2.0725 per U.S. dollar after advancing yesterday to 2.0693, the strongest since Nov. 14.

Unemployment fell to 4.9 percent last month from 5.3 percent in October, the national statistics agency reported today. The reading was lower than forecast by all except two of 33 economists surveyed by Bloomberg, whose median estimate was for the jobless rate to decrease to 5.1 percent.

Read more…