05/04/2013 14:07:00

Brazil Real Opens Stronger on U.S., Europe Data, Selic Outlook

SAO PAULO--Brazil's real opened stronger Friday, accompanying global currencies, as the U.S. reported slower job creation and Europe reported better economic data, while in Brazil investors prepare for possible interest-rate increases.

The real opened at BRL2.0115 to the dollar, according to Tullett Prebon via FactSet, slightly stronger than Thursday's close at BRL2.0157 to the dollar.

The euro strengthened somewhat against the dollar early Friday after Germany's manufacturing data topped market estimates. Meanwhile, the U.S. reported the slowest month of job creation since June, with 88,000 jobs added last month, less than the 200,000 expected by economists surveyed by Dow Jones Newswires.

At the same time, Brazilian investors are monitoring the central bank for signs it will increase the benchmark Selic interest rate, at a record low of 7.25% since October, at its next monetary policy meeting later this month. Late Thursday, Finance Minister Guido Mantega acknowledged that the central bank has authority to raise or lower interest rates as needed, but said that monetary policy in Brazil has become more efficient, and rates shouldn't have to vary as much as they used to in the past.

President Dilma Rousseff's government has been reluctant to permit rate increases because it doesn't want to counter its efforts to boost growth as the economy stalls. The government has been slashing taxes as part of its effort to lower prices and ease inflation pressure. To that end, it announced early this morning that it will extend payroll tax cuts to several more industries.

After outflows at the start of the year as investor mood soured on Brazil, now "investors are trying to anticipate the moment when the government will have to raise rates to contain inflation," said Reginaldo Galhardo, currency trader at brokerage Treviso.

Brazil's monetary policy committee next meets April 17.

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

(END) Dow Jones Newswires

April 05, 2013 09:07 ET (13:07 GMT)

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

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