Real takes a reality check as Brazil strains to support its currency

Katie Martin – Financial Times, 10/4/2015

Brazil’s currency, the real, is tormenting many fund managers.  Few thought it would see out the year unscathed. The country’s high interest rates were never likely to be enough entirely to shield the currency from trading weakness at a time when the economy was shrinking and the US is on the cusp of raising interest rates.

But the real has contrived to stand out particularly among a field of emerging markets currencies almost all of which have suffered bruising declines.

The pace and scale of the fall in the Brazilian currency, once a popular pick as one of emerging markets’ juiciest bets, have stumped even the most seasoned observer and left some investors peeking at their screens through their fingers. “Mayhem” is how Rabobank described it; the source of “one of the wildest days we’ve ever seen in Latin American markets”.

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Brazil Central Bank reiterates it is ready to keep current interest rate

Paulo Trevisani – The Wall Street Journal, 8/6/2015

Brazil’s central bank’s strategy to slow price increases is working, and the bank is ready to leave its benchmark interest rate at 14.25% while the inflation rate declines, according to the minutes from last week’s monetary policy meeting.

The bank reiterated in the minutes, published on Thursday, that risks for inflation this year are unfavorable, while repeating its pledge to drive inflation down to target by December 2016. It repeated that conditions for lower inflation next year have improved.

Inflation is forecast to end this year at 9.3%, according to a survey of economists made by the central bank. The forecast for the end of 2016 is 5.4%. The bank’s 12-month inflation target is 4.5%, with a two-point tolerance range in either direction.

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Brazil analysts boost 2016 benchmark rate call for second week

David Biller – Bloomberg Business, 7/13/2015

Brazil analysts raised their 2016 forecast for the benchmark Selic rate as the central bank vows to slow inflation to target by the end of next year.

Analysts increased their forecast for the Selic rate at end-2016 to 12.25 percent from 12.06 percent the prior week, according to the July 10 central bank survey of about 100 analysts published Monday. That’s the second straight increase of analysts’ median forecast. They also reduced their 2016 inflation prediction for the second time, to 5.44 percent from 5.45 percent.

Brazil’s inflation is running at almost double the target as the government raises regulated prices and a weaker currency fuels the price of imports. The central bank, which raised the key rate in the past six meetings, will continue to lift borrowing costs even as the economy heads to its deepest recession in 25 years.

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Brazil’s inflation rate to reach 9.12 pct in 2015

Silvio Cascione – Reuters, 7/13/2015

Economists raised their forecasts for Brazil’s end-2015 inflation rate but lowered their estimates for price increases next year, a weekly central bank survey showed on Monday.

The median forecast of about 100 financial institutions in
the poll also showed an increase in expectations for benchmark
interest rates next year.

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Brazil analysts boost interest-rate forecast to nine-year high

David Biller – Bloomberg Business, 06/01/2015

Economists raised their forecast for Brazil’s key interest rate to the highest since 2006 as they expect policy makers to continue boosting borrowing costs after this week’s meeting.

Analysts changed their forecast for the year-end benchmark rate to 14 percent from 13.75 percent, according to the May 29 central bank survey of about 100 analysts published Monday. They also increased their outlook for 2015 consumer-price increases to 8.39 percent from 8.37 percent the prior week.

Above-target inflation is forcing Brazil’s central bank to raise interest rates even as the economy heads toward recession. Analysts in Monday’s survey forecast gross domestic product will shrink 1.27 percent this year, which would be the worst performance since 1990.

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Brazil’s Real Falls as Ukraine Turmoil Saps Emerging-Market Bid

Paula Sambo and Filipe Pacheco – Bloomberg Businessweek, 7/29/2014

Brazil’s real dropped the most among major Latin American currencies as turmoil in Ukraine dried up demand for emerging-market assets.

The real declined 0.2 percent to 2.2279 per U.S. dollar at 9:42 a.m. in Sao Paulo. Swap rates, a gauge of expectations for interest-rate moves, increased six basis points, or 0.06 percentage point, to 11.33 percent on the contract maturing in January 2017.

Investors sought refuge in the dollar as the European Union and the U.S. prepared new sanctions against Russia while President Vladimir Putin’s administration formulated its response to international pressure over the conflict in Ukraine.

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Brazil to boost credit to counter economic slowdown

Walter Brandimarte – Reuters, 7/25/2014

Brazil’s central bank on Friday announced measures to boost credit in the country’s ailing economy, one week after keeping its benchmark interest rate at its highest level in over two years to fight inflation.

The bank said in a statement it was freeing up an estimated 30 billion reais ($13.5 billion) in the financial system through changes to banks’ reserve requirements.

The move “aims at improving the distribution of liquidity in the economy” given a recent slowdown in credit and relatively low levels of bad loans, the bank said.

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