Paula Sambo – Bloomberg Businessweek, 11/04/2014
Brazil’s real led emerging-market declines as an unexpected drop in industrial production in September added to concern that President Dilma Rousseff will struggle to revive Latin America’s largest economy.
The currency weakened 0.9 percent to 2.5189 per dollar at 2:02 p.m. in Sao Paulo in the biggest drop among 24 developing nations. Swap rates, a gauge of expectations for changes in borrowing costs, increased 10 basis points, or 0.10 percentage point, to 12.49 percent on the contract due in January 2017.
The real also fell on wagers that Rousseff will appoint a finance minister who will maintain policies that helped lead to Brazil’s first recession since 2009. One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, was the highest among 16 major currencies.
Filipe Pacheco – Bloomberg, 1/3/2014
Brazil’s real fell to a five-month low in an emerging-market selloff as economists reduced their currency forecast and the trade deficit widened to a record.
The real depreciated 1.1 percent to 2.4403 per dollar at the close in Sao Paulo, the weakest level since Aug. 21. A Bloomberg customized index tracking 20 emerging-market currencies fell 0.4 percent today to the lowest since 2009 after declining 3 percent last month. The Bloomberg-JPMorgan Latin America Currency Index of the region’s most-traded currencies, slid 1 percent today to a decade low.
Brazil’s currency will fall to 2.47 per dollar by the end of the year, according to the median of about 100 estimates in a central bank survey of economists published today, compared with the forecast of 2.45 a week ago. Brazil posted a trade deficit of $4.06 billion in January, the biggest on record.
The Economist, 1/16/2014
THE year did not begin well for Dilma Rousseff. The real ended 2013 one-third weaker against the dollar than when she took office as Brazil’s president three years ago. Car sales were down for the first time in a decade. More dollars flowed out of the country than at any time since 2002.
Most perniciously, on January 12th the bean-counters announced that inflation hit 0.92% in December, the highest monthly rise in ten years. That pushed the annual figure to 5.91%, above market expectations. The jump prompted the Central Bank to raise the main interest rate on January 15th, not—as analysts had long forecast—by a quarter of a percentage point, but by half a point, to 10.5%.
Inflation is a Brazilian bugbear. The economic costs are clear: high inflation hits both the poor, struggling to make ends meet, and the indebted middle classes as interest rates rise. But it is also a political issue. Most adults recall the hyperinflationary era of the early 1990s, when shopkeepers would adjust prices each morning, and then change them again in the afternoon.
Gabrielle Coppola – Bloomberg, 11/25/2013
Brazil’s real declined on speculation the Federal Reserve will curtail monetary stimulus amid concern the government’s deteriorating finances will lead to a reduced credit rating.
The currency depreciated 0.1 percent to 2.2826 per U.S. dollar at 10:09 a.m. in Sao Paulo after rising 1.5 percent last week, its first weekly gain since Oct. 18. Swap rates on the contracts due in January 2015 fell one basis point, or 0.01 percentage point, to 10.86 percent.
“The dollar’s recovery is tied to the possibility that the Fed may reduce stimulus,” Joao Paulo de Gracia Correa, currency manager at Correparti Corretora de Cambio, said in a telephone interview from Curitiba, Brazil.
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.
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.
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.