Brazilian Real rises on speculation government allies splitting

Paulo Sambo – Bloomberg, 03/28/2016

Brazil’s real advanced amid increasing speculation that an impeachment of President Dilma Rousseff is getting closer as her political allies fall away.

Traders pushed up the value of the Brazilian currency amid reports that the biggest party in Congress may leave the governing coalition as soon as Tuesday. The PMDB’s decision to split with the government may prompt other parties to follow, further reducing the government’s support. The real added 1 percent to 3.6427 per dollar at 9:59 a.m. in Sao Paulo The currency has gained 8.7 percent this year, the most among its most-traded counterparts.

“The prospect of PMDB and other parties splitting with the government is boosting Brazilian assets today,” said Eduardo Longo, who helps manage 23 billion reais as a fixed-income portfolio manager at Quantitas, in Porto Alegre, Brazil.

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Brazil’s real: how low can it go?

Joe Leahy, John Paul Rathbone – Financial Times, 02/08/2016

When Dilma Rousseff attended the 2016 opening session of Brazil’s congress this week, she appealed to lawmakers to approve tax increases to tackle a widening gap in the country’s public finances.

Most critically, the president called for the reintroduction of a tax on financial transactions, known as the CPMF, that was abandoned in 2007 after objections from business. Opposition congressmen booed her.

But with Brazil reporting a budget deficit last year that was the biggest among emerging economies except for Saudi Arabia at over 10 per cent, unpopular measures are needed to save the country from a deepening fiscal hole, analysts say

Brazilian Real Advances on Outlook for Rousseff’s Economic Team

Filipe Pacheco – Bloomberg, 11/10/2014

Brazil’s real rose for a second day on speculation President Dilma Rousseff will appoint an economic team that will revive growth and on wagers the U.S. Federal Reserve will avoid an early increase in interest rates.

The currency gained 0.3 percent to 2.5522 per dollar at the close of trade in Sao Paulo after dropping 3.2 percent last week. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, fell 0.04 percentage point to 12.61 percent on the contract maturing in January 2017. The real advanced amid optimism that the next finance minister will move away from policies that helped lead Brazil into a recession in the first half of the year. Today’s increase was the biggest among 16 major currencies tracked by Bloomberg after the South Korean won.

“There has been a lot of expectation that a new economic team will be able to restore growth,” Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo, said in a telephone interview.

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Brazil’s Tombini sees no dollar shortage in local spot market

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.

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How the shutdown and possible default affect Latin America: trade and growth in the region would take major hit

Patricia Rey Mallén – International Business Times, 10/14/2013

As the United States holds its breath waiting for the resolution on the shutdown, so does Latin America. The fiscal crisis that began two weeks ago with the closing of the U.S. government and could culminate in a U.S. debt default in a few days could have disastrous consequences for the United States’ southern neighbors, hurting the currency exchange rates and weakening the region’s growth.

The U.S., still Latin America’s largest trade partner and investor, must decide whether it will raise the debt ceiling, currently at $16.7 trillion, or suspend payments to bondholders. If that were to happen, possibly as soon as October 17, the world economy would suffer another blow, starting in Latin America and the Caribbean.

“The region is in a very complex situation due to the fiscal crisis and the shutdown,” Colombian financial analyst Juan Alberto Pineda told financial newspaper El Economista América. “The signals that are coming out [of Washington] do not look positive for Latin American exports, or an exchange rate that allows the region to compete in global trade.”

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Brazil real stronger in thin volume, with Central Bank absent

Tom Murphy – The Wall Street Journal, 13/02/2013

SAO PAULO–The Brazilian real ended active trading Wednesday slightly stronger against the Friday close in thin post-holiday volume.

The real ended active trading at BRL1.9642 to the dollar, stronger from the Friday close of BRL1.9698, according to Tullett Prebon via FactSet. Brazilian markets were closed Monday and Tuesday for the annual Carnival festivities.

Traders said there was little pressure from either side of the market Wednesday, with the real drifting to a stronger position on U.S. dollar inflows from foreign investors, mainly in Brazilian stocks, and from overseas bond issues by Brazilian companies.

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Brazil real rises most among world currencies on intervention

Ney Hayashi, Patricia Lara – Bloomberg, 12/26/2012

Brazil’s real rallied the most in the world as the central bank intervened to stem the currency’s drop and contain inflation in Latin America’s biggest economy.

The real advanced to a six-week high as the central bank sold $1.8 billion of currency swaps at two auctions and agreed to lend as much as $2 billion in foreign-exchange credit lines. Swap rates fell as speculation eased that policy makers will boost the target lending rate, known as the Selic, to cap consumer prices.

The real jumped 1.2 percent to 2.0557 per U.S. dollar at 4:22 p.m. in Sao Paulo, the strongest on a closing basis since Nov. 12. The gain was the biggest among all of the world’s currencies tracked by Bloomberg. The real pared its drop in 2012 to 9 percent after falling on Nov. 30 to a three-year low of 2.1360. Swap rates on the contract due in January 2014 fell three basis points, or 0.03 percentage point, to 7.14 percent.

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Brazil’s real goes from best to worst

Kenneth Rapoza – Forbes, 05/18/2012

Brazil’s currency, the real, has gone from one of the best performing foreign currencies against the U.S. dollar, to the worst in a matter of three months. The real was as strong as R$1.65 in late February only to fall below R$2 to the dollar last week.  It is currently trading around R$2.03 in the spot market on Friday.

Finance Minister Guido Mantega said the currency at these levels, near two to one, are better for the Brazilian economy, especially exporters who have to compete with lower cost rivals in Argentina and China. At the corporate level, the bouncy BRL makes it harder for companies to know where to hedge their bets on the forex. Is it wiser to assume the average BRL is R$1.95 or R$2.20 this quarter? Making those positions becomes costly and could be devastating if the bets are wrong.

In 2008 and 2009, two major Brazilian companies — Sadia and Aracruz — folded because of a failed forex hedging strategy.

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India, Brazil to press China on Yuan

Costa Paris, Kanga Kong – The Wall Street Journal, 02/18/2011

Brazil and India will join the U.S. in putting pressure on China to let its currency appreciate at a faster pace during meetings of finance ministers and central bankers from the group of 20 leading economies, an official at a G20 government said Friday.

“The three countries have formed an unofficial pact to express their disappointment,” said the official.

Better coordination of global monetary policies is one of the hot-button issues on the table at the G20 meetings Friday and Saturday. Central to the talks is the Chinese currency, the yuan, which many of China’s trading partners complain has been …

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Brazil and India add to pressure on China

Geoff Dyer – Financial Time, 04/21/2010

China is facing growing pressure from other developing countries to begin appreciating its currency, providing unexpected allies for the US in the diplomatic tussle over Beijing’s exchange rate policy. Speaking ahead of a meeting of finance ministers and central bank heads from the Group of 20 countries which starts on Thursday in Washington, Indian and ­Brazilian central bank presidents have made the most forceful statements yet by their countries about case for a stronger Chinese currency.

While most of the public pressure on China has come from the US, the comments underline that a number of developing economies feel that China’s dollar peg has imposed costs on their economies. Henrique Meirelles, head of the Brazilian central bank, said that a stronger Chinese currency was “absolutely critical for the equilibrium of the world economy”. Duvvuri Subbarao, governor of the Reserve Bank of India said that an undervalued renminbi was creating problems for countries, including India.

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