Brazilian Real Advances on Outlook for Rousseff’s Economic Team

November 12, 2014

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

November 18, 2013

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

October 16, 2013

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

February 13, 2013

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

December 26, 2012

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

May 18, 2012

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

February 18, 2011

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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