Brazil’s real falls to weakest point in 12 years

Reese Ewing – Reuters, 7/24/2015

Brazil’s real fell on Friday to its weakest against the dollar in 12 years, slipping quickly in early trade to 3.334 to the dollar.

The slide in the local currency comes after Brazilian Finance Minister Joaquim Levy announced on Wednesday the government would slash its primary surplus target due to deteriorating tax revenues amid Brazil’s deepening economic slump.

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Brazil stock traders recoil at Volpon’s rate call as real climbs

Denyse Godoy, Paula Sambo, and Filipe Pacheco – Bloomberg Business, 7/21/2015

Brazilian shares dropped to an almost four-month low on speculation borrowing costs at Latin America’s largest economy will increase further, curbing prospects for equities. The real advanced for the first time in four days.

The Ibovespa extended this month’s slump after central bank director Tony Volpon said policy makers should keep raising interest rates until the outlook for inflation reaches the government’s target. The benchmark stock gauge has tumbled 11 percent from this year’s peak on concern the decision to boost the Selic to a six-year high to tame consumer prices will deepen an economic contraction.

“The central bank will probably increase rates again next week in a trend that’s damaging the economy and prospects for companies,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said by phone from Sao Paulo.

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Brazil real drops on concern Rousseff will lower budget target

Paula Sambo – Bloomberg Business, 7/13/2015

Brazil’s real fell from a one-week high as speculation that political tension will force President Dilma Rousseff’s administration to compromise on the budget cast doubt on her commitment to preserve the nation’s credit rating.

The currency extended its drop in July to 2.1 percent as lawmakers pushed back against her move to narrow government deficits. Concern mounted after the Brazilian newspapers Estado and Folha de S. Paulo reported that Rousseff will discuss a reduction in the fiscal target at a meeting Monday.

“While Rousseff’s effort to solidify the fiscal base is positive, the course of discussions and political barriers may trigger short-term volatility in the financial markets,” Ipek Ozkardeskaya, an analyst at London Capital Group, said in an e-mailed response to questions.

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Top Brazil hedge fund Verde sees domestic assets still falling

Guillermo Parra-Bernal and Paula Arend Laier – Reuters, 7/08/2015

Verde Asset Management, Brazil’s largest hedge fund, reinforced larger-than-benchmark bets on a weaker real, rising global equities and higher domestic borrowing costs, underscoring expectations that local asset prices will keep trending down in dollar terms.

In a monthly letter to investors on Wednesday, money managers led by Luis Stuhlberger said Verde is long-positioned in U.S. dollars and global equities by 40 percent and 20 percent, respectively, with no net allocation to local shares. The fund is also long positioned in Brazilian debt linked to inflation-adjusted interest rates.

Global investors are “overly optimistic” about Brazil’s outlook by assuming that domestic asset prices, as measured in U.S. dollars, are cheap and that a year-long decline in the Brazilian real is coming to an end.

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Brazilian real leads declines as China triggers rout in iron ore

Paula Sambo and Filipe Pacheco – Bloomberg Business, 7/08/2015

The real led losses among major currencies as China’s equity meltdown triggered a plunge in the price of Brazil’s iron-ore exports.

A drop in the shares of Rio de Janeiro-based Vale SA, the world’s biggest miner of the raw material, added to concern that international investors are withdrawing funds from Brazil. Iron ore sank Wednesday to the lowest level in at least six years as China’s stock decline threatened demand just as the largest producers including Vale raised output.

“Plummeting iron-ore prices put pressure on the real,” Kenneth Lam, a Citigroup Inc. strategist in New York, wrote in a research report to clients.

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Brazil antitrust agency investigating banks for suspected rate manipulation

Jeffrey T. Lewis and Rogerio Jelmayer – The Wall Street Journal, 7/02/2015

Brazil’s antitrust agency is investigating banking giants Citigroup Inc., HSBC Holdings PLC, Deutsche Bank AG and a long list of their peers on suspicion of forming a cartel to manipulate the exchange rate of the Brazilian currency, the real.

There are “strong indications” of the use of anticompetitive practices in the foreign-exchange market by the three big banks and 12 other U.S. and overseas lenders, the agency, known as CADE, said Thursday. The agency also named 30 individuals in the investigation.

CADE said there was evidence the banks and the individuals worked together to fix the exchange rate, coordinate the buying and selling of currencies, manipulate the Brazilian central bank’s PTAX reference exchange rate and impede the operations of other banks operating in Brazil’s foreign-exchange market, among other things.

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Real drops amid signs Brazil faces worst recession in 25 years

Paula Sambo – Bloomberg, 6/19/2015

The real fell the most among major currencies as Brazil braced for its worst recession in 25 years after the central bank reported that the economy contracted more than forecast in April.
Efforts by President Dilma Rousseff’s administration to reassure investors by increasing taxes and reducing expenditures are expected to damp the nation’s gross domestic product in the second quarter. Moreover, Brazil is the only nation in the Group of 20 to raise interest rates this year as inflation stays above target, further hampering growth prospects.
“It’s not a good picture,” Joao Paulo De Gracia Correa, a foreign-exchange superintendent at SLW Corretora de Valores, said in a telephone interview from Sao Paulo. “The economy is coming in even weaker than anticipated.”

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