Brazil Real falls with bonds on concern Fed will reduce stimulus

December 2, 2013

Gabrielle Coppola & Josue Leonel – Bloomberg, 12/02/2013

Brazil’s real fell to a three-month low on speculation the Federal Reserve will curtail monetary stimulus and amid concern the government’s deteriorating finances will lead to a credit rating cut.

The currency depreciated 0.6 percent to 2.3511 per U.S. dollar at 10:01 a.m. in Sao Paulo, the weakest level on a closing basis since Sept. 4. The decline was the biggest among major currencies tracked by Bloomberg. A drop in local-currency government bonds maturing in 2023 pushed yields up 14 basis points, or 0.14 percentage point, to 13.07 percent, the highest since the securities were issued in March 2012. Swap rates on contracts maturing in January 2016 climbed nine basis points to 11.88 percent.

The real fell on speculation that U.S. manufacturing and employment reports this week will show the world’s largest economy is strong enough for the Fed to curtail the program of bond purchases that have kept Treasury yields low and buoyed emerging-market assets.

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Real gains as China economic plans offset Brazil fiscal concern

November 18, 2013

Gabrielle Coppola & Josue Leonel – Bloomberg, 11/18/2013

The real climbed the most among emerging-market currencies as a planned easing of economic regulations in China, the nation’s biggest trading partner, offset Brazil’s fiscal concern.

The currency appreciated 1.4 percent to 2.2813 per U.S. dollar at 12:46 p.m. in Sao Paulo after declining on Nov. 13 to 2.3341, the weakest level since Sept. 4. Swap rates on contracts maturing in January 2015 fell seven basis points, or 0.07 percentage point, to 10.73 percent.

Brazil sold $496 million of foreign-exchange swaps today as part of a $60 billion intervention program to support the currency and curb import price increases. The real has pared its gain since the program was announced Aug. 22 to 6.6 percent on concern the swelling government budget deficit will lead to a credit rating cut.

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Brazil real strengthens 1 percent against dollar

June 25, 2013

Reuters, 06/26/2013

The Brazilian real strengthened 1 percent against the U.S. dollar on Tuesday as investors awaited an auction of traditional currency swaps scheduled by the central bank for Tuesday morning.

The bank said in a statement it will offer as many as 66,000 swaps, derivative contracts designed to support the real, at an auction scheduled for 10:30 a.m. local time (1330 GMT).

At 9:15 a.m. (1215 GMT), the real strengthened 0.80 percent to 2.2088 per dollar after having risen more than 1 percent earlier in the session.

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Brazil stocks, real plunge on fed policy, domestic woes

June 20, 2013

The Brazilian real continued its sharp depreciation Thursday while stocks plunged and interest-rate futures spiked, due to domestic economic woes and shifting monetary policies in the United States.

As of late morning trading, the Brazilian real was worth BRL2.2523 to the dollar, a sharp plunge from the Wednesday close of BRL2.2143. Wednesday also represented a major loss for the Brazilian currency.

Stocks were also down sharply. The benchmark Ibovespa stocks index was down 3.97% at 45990, according to Tullett Prebon via FactSet.

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J.P. Morgan asset management rebuts gloomy Brazil scenarios

June 13, 2013

Mathew Cowley - The Wall Steet Journal, 06/12/2013

Investors are too pessimistic about Brazil, and, although broad economic growth has disappointed, there are still plenty of opportunities to make money, according to J.P. Morgan JPM -0.27% Alternative Asset Management.

“The sentiment pendulum has swung too far,” said Robert Klein, president of the hedge fund business, in an interview. At 3.0% to 3.5% growth in Brazil “there are still interesting opportunities.”

A consumer that is still in good shape, more reasonable asset valuations and a vast, diverse geography are some of the advantages highlighted in a new report published by J.P. Morgan and its Brazilian asset management arm Gavea Investimentos.

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Brazil’s central bank sells $996.1 mln of currency swaps

June 10, 2013

Reuters, 06/10/2013

Brazil’s central bank sold $996.1 million in currency swap contracts in an auction on Monday, helping pare losses in the real.

The bank sold 20,000 of the 40,000 swap contracts on offer, which mature on July 1 and Aug. 1.

Brazil’s currency, the real, was trading 0.77 percent weaker at 2.148 reais per U.S. dollar shortly after the auction.

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Brazil didn’t fix inflation and now it’s paying the price

June 7, 2013

Michael J. Casey – The Wall Street Journal, 06/06/2013

Lesson No. 1 from Brazilian authorities’ struggle to prop up the real: If you can’t control inflation, you can’t control your currency.

For all the firepower Brazil is throwing at driving the real higher, the market clearly wants to take it the other way. Despite an unexpectedly large rate hike on May 29, two rounds of dollar-selling intervention by the Brazilian central bank and, most drastic of all, an end to the so-called IOF tax on foreign bond purchases, the currency is trading only slightly above four-year lows.

Other emerging-market currencies have also weakened over the past week, amid concerns that the Federal Reserve is preparing to pullback on a flood of monetary stimulus that has flowed relentlessly into world markets. However, we’re seeing none of the same scramble to defend them by officials in those countries. In fact, officials from Colombia to Poland have been indicating that they are quite happy to see this depreciation, as it helps boost exports and counteract slowing global demand.

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Brazil scraps IOF tax on foreign fixed income investment

June 5, 2013

Financial Times, 06/05/2013

Now this was unexpected. Brazil on Tuesday said it would scrap the 6 per cent IOF (financial operations tax) currently levied on foreign portfolio inflows into fixed income investments.

It’s a pretty drastic move. The country only raised the IOF on fixed income investments from 4 per cent to 6 per cent a little over two and a half years ago.

At the time, the hike was intended to stem the flow of hot money that had been making its way into Brazil’s high-yielding fixed income market and curb the Brazilian real’s rise against the US dollar.

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Tombini says weak real has little impact on Brazil inflation

June 4, 2013

Raymond Colitt & Benhamin Harvey – Bloomberg, 06/03/2013

The depreciation of the real, which fell to a four-year low last week, probably will have a limited impact on Brazilian inflation, said Alexandre Tombini, the central bank president.

“Our depreciation has been more moderate than some other countries,” Tombini said yesterday in an interview at a conference in Istanbul. “As far as pass-through to inflation, provided the exchange regime is flexible, as is the case in Brazil, so the pass-through should be limited.”

The real gained 0.49 percent to 2.1313 against the dollar at 10:15 a.m. local time after sliding 4.2 percent last week, the worst performance after the South African rand among the 16 most traded currencies tracked by Bloomberg. The currency had weakened even after policy makers on May 29 unexpectedly accelerated the pace of rate increases in a bid to tame inflation that has damped an economic recovery.

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Brazil’s real closes weaker

May 3, 2013

Paul Kiernan – The Wall Street Journal, 05/02/2013

Brazil’s real closed moderately weaker against the dollar Thursday, likely influenced by financial and trade-related flows as well as a sharp decline in the euro after comments by Europe’s top central banker.

The real exited active trading at BRL2.0094 to the dollar, according to Tullett Prebon via FactSet, compared with Tuesday’s close of BRL1.9996. Brazilian financial markets were closed Wednesday for the country’s Labor Day holiday.

The euro, which Brazil’s currency sometimes tracks, lost around 1% of its value against the greenback after European Central Bank President Mario Draghideclined to rule out the possibility of cutting an interest rate on overnight deposits below zero. Implementing negative interest rates would be intended to encourage banks to lend or invest rather than leaving their extra cash at the ECB.

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