Brazil’s swap rates climbed after central bank President Alexandre Tombini said policy makers will fight inflation as the real weakens, reviving speculation that the central bank will extend increases in borrowing costs.
Swap rates on contracts maturing in January 2016 rose nine basis points, or 0.09 percentage point, to 12.16 percent at 3:34 p.m. in Sao Paulo.
The real slid 0.9 percent to 2.4198 per dollar, the weakest since Aug. 22. It tumbled 2.3 percent last week as part of a broad decline in emerging-market currencies.
The central bank is combating inflation in the context of a weaker real, Tombini said at a presentation in London today.
The currency has dropped 9.2 percent in the past three months on concern fiscal deterioration will lead to a lower credit rating and amid speculation that the tapering of Federal Reserve stimulus will erode demand for Brazil’s assets.
“Tombini’s message in London was a bit more hawkish than people expected,” Italo Lombardi, economist at Standard Chartered Plc, said in a phone interview from New York.
Tombini also said that adopting a “sound fiscal policy” is a priority for the country as the government prepares to announce its public spending plans for this year.
Annual inflation slowed to 5.63 percent through mid-January from a prior 5.85 percent pace, the national statistics agency said Jan. 23. The median forecast of economists surveyed by Bloomberg was 5.76 percent.
The central bank raised the target lending rate by 50 basis points on Jan. 15 for a sixth consecutive time, increasing it to 10.50 percent.
Swap Sales
To support the currency and limit import price increases, Brazil sold $197 million of foreign-exchange swaps today under a program announced Dec. 18.
It extended the maturity on $1.23 billion of swaps due Feb. 3, raising the amount rolled over to almost $10 billion out of a total of $11 billion.
Economists raised their forecast for the target lending rate at the end of 2014 to 11 percent from 10.75 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today.
While they raised their inflation forecast for 2015 to 5.7 percent from 5.6 percent, they cut their growth forecast to 2.2 percent from 2.5 percent.
The currency dropped last week as Argentina, Brazil’s third-biggest trading partner, devalued the peso and scrapped some of its currency controls.
The real also fell as a report from HSBC Holdings Plc and Markit Economics indicated that manufacturing in China, Brazil’s biggest trading partner, may contract for the first time in six months.
Three-month historical real volatility increased today to 13 percent, the highest since Dec. 17 and the most among major dollar counterparts tracked by Bloomberg.
“Some emerging-market currencies are oscillating a lot, and the real is following along,” Francisco Carvalho, currency director at Liquidez Dtvm in Sao Paulo, said in a phone interview. “The real has a higher volatility than usual.”
bloomberg.com
Swap rates on contracts maturing in January 2016 rose nine basis points, or 0.09 percentage point, to 12.16 percent at 3:34 p.m. in Sao Paulo.
The real slid 0.9 percent to 2.4198 per dollar, the weakest since Aug. 22. It tumbled 2.3 percent last week as part of a broad decline in emerging-market currencies.
The central bank is combating inflation in the context of a weaker real, Tombini said at a presentation in London today.
The currency has dropped 9.2 percent in the past three months on concern fiscal deterioration will lead to a lower credit rating and amid speculation that the tapering of Federal Reserve stimulus will erode demand for Brazil’s assets.
“Tombini’s message in London was a bit more hawkish than people expected,” Italo Lombardi, economist at Standard Chartered Plc, said in a phone interview from New York.
Tombini also said that adopting a “sound fiscal policy” is a priority for the country as the government prepares to announce its public spending plans for this year.
Annual inflation slowed to 5.63 percent through mid-January from a prior 5.85 percent pace, the national statistics agency said Jan. 23. The median forecast of economists surveyed by Bloomberg was 5.76 percent.
The central bank raised the target lending rate by 50 basis points on Jan. 15 for a sixth consecutive time, increasing it to 10.50 percent.
Swap Sales
To support the currency and limit import price increases, Brazil sold $197 million of foreign-exchange swaps today under a program announced Dec. 18.
It extended the maturity on $1.23 billion of swaps due Feb. 3, raising the amount rolled over to almost $10 billion out of a total of $11 billion.
Economists raised their forecast for the target lending rate at the end of 2014 to 11 percent from 10.75 percent a week earlier, according to the median of about 100 estimates in a central bank survey published today.
While they raised their inflation forecast for 2015 to 5.7 percent from 5.6 percent, they cut their growth forecast to 2.2 percent from 2.5 percent.
The currency dropped last week as Argentina, Brazil’s third-biggest trading partner, devalued the peso and scrapped some of its currency controls.
The real also fell as a report from HSBC Holdings Plc and Markit Economics indicated that manufacturing in China, Brazil’s biggest trading partner, may contract for the first time in six months.
Three-month historical real volatility increased today to 13 percent, the highest since Dec. 17 and the most among major dollar counterparts tracked by Bloomberg.
“Some emerging-market currencies are oscillating a lot, and the real is following along,” Francisco Carvalho, currency director at Liquidez Dtvm in Sao Paulo, said in a phone interview. “The real has a higher volatility than usual.”
bloomberg.com
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