BLBGl: Brazil’s Real Extends Weekly Rally on Outlook for Economic Team
Brazil’s real extended its weekly rally to the biggest since March on speculation that President Dilma Rousseff is close to nominating a team capable of reviving Latin America’s largest economy.
The currency strengthened 1.2 percent to 2.5423 per U.S. dollar at 10:08 a.m. in Sao Paulo, the biggest increase among 24 emerging-market counterparts after Russia’s ruble.
The real climbed 2.3 percent this week as a government official with knowledge of the situation said Rousseff plans to announce a replacement for Finance Minister Guido Mantega in the next days. Her new economic team will face the challenge of reviving growth after Brazil slipped into a recession in the first half of the year.
“The expectations that she will nominate a strong team are high now,” Joao Paulo de Gracia Correa, a foreign-exchange trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in a telephone interview.
Rousseff’s short list for finance minister includes former Deputy Finance Minister Nelson Barbosa, central bank President Alexandre Tombini and former Treasury Secretary Joaquim Levy, according to the official, who asked not to be identified because discussions are private. Rousseff said yesterday in Brasilia that she was re-elected in October to “make changes.”
The real also rose today as China, the largest trading partner of Brazil, cut benchmark interest rates for the first time since July 2012. The move benefited developing-nation currencies including the real, Correa said.
One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, is the highest among 31 major currencies after the ruble.
Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, declined 0.10 percentage point to 12.46 percent today on the contract maturing in January 2017. They have decreased 0.27 percentage point this week.
To contact the reporter on this story: Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net
To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Dennis Fitzgerald, Srinivasan Sivabalan
