Brazil’s real dropped to a four-year low, adding to concern inflation will undermine efforts to stimulate Latin America’s largest economy.
Swap rates rose on speculation the central bank will maintain the pace of increases in borrowing costs even as a report for July showed inflation slowed.
The real has tumbled 12 percent in the past three months, the biggest drop among 24 emerging-market dollar counterparts tracked by Bloomberg.
The depreciation pushes up the price of imports and threatens to further fuel inflation, which helped spark nationwide street protests last month.
“The central bank seems to have a blank check to combat inflation,” Daniel Cunha, the chief economist at XP Investimentos in Sao Paulo, said in a telephone interview. “The fight against inflation seems to have greater weight than economic growth.”
The currency declined 0.6 percent to 2.2825 per U.S. dollar, the weakest closing level since March 2009. Swap rates on the contract maturing in January 2015 climbed 11 basis points, or 0.11 percentage point, to 9.59 percent, a two-week high.
Brazil’s central bank will remain vigilant in its effort to control inflation even as price indexes rise at a slower pace, the Folha de S. Paulo newspaper reported today, without saying how it got the information.
The monetary authority declined to comment when phoned by Bloomberg News. The IGP-M index of wholesale, construction and consumer prices climbed 0.26 percent in the 30 days ended July 20 after a prior 0.75 percent rise, the Getulio Vargas Foundation reported today.
The median forecast of analysts surveyed by Bloomberg was for an increase of 0.27 percent.
Debt Auction
The Treasury sold 1.25 billion reais of inflation-linked bonds due in 2018 and 2022. The five-year bonds priced to yield 4.82 percent and the nine-year debt paid 5.11 percent.
The real fell along with most emerging-market currencies on speculation the Federal Reserve will begin to reduce its $85 billion in monthly asset purchases. U.S. policy makers are meeting today and tomorrow.
“There’s an expectation in relation to the monetary policy meetings of the Fed, and that is making the dollar gain,” Newton Rosa, the chief economist at SulAmerica Investimentos in Sao Paulo, said in a phone interview.
Brazil’s policy makers raised the target lending rate by a half-percentage point on July 10 to 8.50 percent, the third increase this year.
The central bank said in minutes of the meeting that it is appropriate to maintain the pace of increases in borrowing costs to curb inflation.
The monetary authority sold foreign-exchange swap contracts on July 26 worth $994 million to support the real, the 19th day of auctions since May 31.
bloomberg.com
Swap rates rose on speculation the central bank will maintain the pace of increases in borrowing costs even as a report for July showed inflation slowed.
The real has tumbled 12 percent in the past three months, the biggest drop among 24 emerging-market dollar counterparts tracked by Bloomberg.
The depreciation pushes up the price of imports and threatens to further fuel inflation, which helped spark nationwide street protests last month.
“The central bank seems to have a blank check to combat inflation,” Daniel Cunha, the chief economist at XP Investimentos in Sao Paulo, said in a telephone interview. “The fight against inflation seems to have greater weight than economic growth.”
The currency declined 0.6 percent to 2.2825 per U.S. dollar, the weakest closing level since March 2009. Swap rates on the contract maturing in January 2015 climbed 11 basis points, or 0.11 percentage point, to 9.59 percent, a two-week high.
Brazil’s central bank will remain vigilant in its effort to control inflation even as price indexes rise at a slower pace, the Folha de S. Paulo newspaper reported today, without saying how it got the information.
The monetary authority declined to comment when phoned by Bloomberg News. The IGP-M index of wholesale, construction and consumer prices climbed 0.26 percent in the 30 days ended July 20 after a prior 0.75 percent rise, the Getulio Vargas Foundation reported today.
The median forecast of analysts surveyed by Bloomberg was for an increase of 0.27 percent.
Debt Auction
The Treasury sold 1.25 billion reais of inflation-linked bonds due in 2018 and 2022. The five-year bonds priced to yield 4.82 percent and the nine-year debt paid 5.11 percent.
The real fell along with most emerging-market currencies on speculation the Federal Reserve will begin to reduce its $85 billion in monthly asset purchases. U.S. policy makers are meeting today and tomorrow.
“There’s an expectation in relation to the monetary policy meetings of the Fed, and that is making the dollar gain,” Newton Rosa, the chief economist at SulAmerica Investimentos in Sao Paulo, said in a phone interview.
Brazil’s policy makers raised the target lending rate by a half-percentage point on July 10 to 8.50 percent, the third increase this year.
The central bank said in minutes of the meeting that it is appropriate to maintain the pace of increases in borrowing costs to curb inflation.
The monetary authority sold foreign-exchange swap contracts on July 26 worth $994 million to support the real, the 19th day of auctions since May 31.
bloomberg.com
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