28/03/2013 20:06:00

Brazil Real Weakens To BRL2.02/Dollar On Worsening Fundamentals

By Paulo Winterstein

SAO PAULO--Brazil's real weakened Thursday on concern the currency's fundamentals are worsening after the central bank boosted its inflation forecast for this year and next.

The real exited active trading at BRL2.0202 to the dollar, according to Tullett Prebon via FactSet, weaker than Wednesday's close at BRL2.0066 to the dollar.

After initial strength as global currencies climbed against the dollar, the real weakened in afternoon trading.

"There is a deterioration of the fundamentals underpinning Brazil's currency," said Ricardo Matone, currency trader at asset manager M Safra in Sao Paulo. "We're working with higher inflation and the government seems reticent to control it in a more effective way; inflows have disappointed, forcing a downward revision of balance of payments."

Brazil's central bank, which said during its latest monetary-policy meeting that inflation has proven resilient and may have reached "a new and higher plateau," increased its inflation forecast for 2013 to 5.7% from a previous estimate of 4.8%. Inflation is likely to stay high above the bank's target of 4.5% next year as well, with inflation likely ending 2014 at 5.3%, up from a previous estimate of 4.9%, the bank said Thursday in its quarterly inflation report.

Investors are increasingly expecting interest-rate increases in coming months as inflation climbs toward the 6.5% upper limit of the bank's inflation target.

Markets backed off on those bets Wednesday after Brazilian President Dilma Rousseff said she was opposed to "policies to combat inflation that seek to reduce economic growth." Ms. Rousseff later asked Central Bank President Alexandre Tombini to clear up any confusion her comments may have caused, and Mr. Tombini told Agencia Estado news agency that "when it becomes necessary to use the instruments of monetary policy to control inflation, that will happen."

Still, Ms. Rousseff's comments wreaked havoc on the market on the view that policy makers were reluctant to raise rates to rein in inflation. The real weakened to BRL2.0252 per dollar Wednesday morning before the central bank intervened directly in the market via the currency-swap auction. Swap auctions allow investors to exchange contracts linked to domestic interest rates for paper indexed to the U.S. dollar. The auction tends to weaken the dollar and strengthen the real by putting more dollar-hedged contracts in investors' hands.

The auction also reinforced many investors' views that policy makers want to keep the real trading between a band of BRL1.95 to BRL2 per dollar. The real has been trading within that range since late January on the outlook that it doesn't hurt the competitiveness of Brazilian exports, but also doesn't increase the cost of imports, which would pressure inflation.

On Thursday, however, the central bank remained quiet, not holding any auctions. M. Safra's Mr. Matone said that further weakness, however, could see more government action.

"If the market tests the bank a little more and the real goes to 2.03 (per dollar), we could see the government easing some of the currency restrictions so that there are stronger inflows," he said, referring to taxes the government had imposed in the past to contain strength in the real.

Write to Paulo Winterstein at paulo.winterstein@dowjones.com

(END) Dow Jones Newswires

March 28, 2013 16:06 ET (20:06 GMT)

Copyright (c) 2013 Dow Jones & Company, Inc.

Post comment

Related debate

  • 1 week
  • 1 month
  • 1 Year
17 Nov
ALMB
Når man dagligt læser indlæg fra Alpehuen, Mackkeith, Malurt, EMEA (MENA), Powertrade som via en flo..
30
17 Nov
PNDORA
Om nogen, har jeg ikke meget tilovers for GW, men jeg har tilladt mig at anmelde dit indlæg. Nu må i..
29
16 Nov
NOVO-B
Og Goodwrench, Baronen og marc55
25
20 Nov
I:SP500
God aften   Gå lige ind under Conference Board i USA og læs, at de ledende indikatorer steg med hele..
24
17 Nov
OMXC20
  Her kommer en kort gennemgang og forklaring på, hvorfor aktietilbagekøb både kan være rigtig godt ..
23
20 Nov
VWS
Roland, nu må du simpelthen stoppe. Det her er simpelthen for ynkeligt, hvordan kan du være så selvi..
22
21 Nov
PNDORA
Hej Roland.   Dem du prøver at råde om aktiehandel, fortjener at vide hvilken tåbe, der prøver at rå..
20
18 Nov
I:NDX
Der er efterhånden alt for få på EI, der bruger hovedparten af deres tid på at tjene penge på aktier..
18
19 Nov
PNDORA
Hvad skal vi med millionærklubben når vi har roland333 
17
16 Nov
VWS
Lavede en kæmpe fodfejl med Vestas. Købte i den private frie pot 1200 stk med gak 402,8 fordi jeg..
15

Majedie Asset Management Ltd : Form 8.3 - TESCO PLC

21/11/2017 15:35:27
FORM 8.3   PUBLIC OPENING POSITION DISCLOSURE/DEALING DISCLOSURE BY A PERSON WITH INTERESTS IN RELEVANT SECURITIES REPRESENTING 1% OR MORE Rule 8.3 of the Takeover Code (the "Code")   1.         KEY INFORMATION   (a) Full name of discloser: ..

Alliance Trust PLC : Net Asset Value(s)

21/11/2017 13:37:22
ALLIANCE TRUST PLC                                    At the close of business on Monday 20 November 2017: The Company's NAV per ordinary share, valued on a bid price basis with Debt at Par, was -       excluding income, 778.0p -       including income, 787.7p  The Company's NAV per ordinary share, valued on a bid price basis with Debt at Fair Value, was -       excluding inc..

Admiral Group PLC : Holding(s) in Company

21/11/2017 10:20:10
TR-1: S tandard form for notification of major holdings NOTIFICATION OF MAJOR HOLDINGS (to be sent to the relevant issuer and to the FCA in Microsoft Word format if possible)i   1a. Identity of the issuer or the underlying issuer of existing shares to which voting rights are attached ii : ..

Most read news

  • 24 hours
  • 48 hours
  • 1 week
1
Genmab Announces European Regulatory Submission for Daratumumab in Front Line Multiple Myeloma
2
ARRAY BIOPHARMA LEAD PLAINTIFF DEADLINE ALERT: Faruqi & Faruqi, LLP Encourages Investors Who Suffered Losses Exceeding $100,000 In Array Biopharma, Inc. To Contact The Firm
3
Lands’ End Names Gill Hong Executive Vice President, Chief Merchandising Officer and Head of International; Names Sarah Rasmusen Senior Vice President of E-Commerce
4
Sprouts Farmers Market to Present at the Barclays 2017 Eat, Sleep, Play – It’s Not All Discretionary Conference
5
Newtek Technology Solutions Joins the VMware Cloud Provider™ Program

Buy and sell signals

  • Trend
  • Moneymachine

Copyright Euroinvestor A/S 2017   Disclaimer and Terms of Use
Quote information is delivered by Morningstar.
Data is delayed 15-20 minutes according to the distribution agreements set by the different exchanges.
 
22 November 2017 10:49:28
(UTC+00:00) Dublin, Edinburgh, Lisbon, London
Version: LiveBranchBuild_20171108.1 - EUROWEB6 - 2017-11-22 11:49:28 - 2017-11-22 10:49:28 - 1000 - Website: OKAY