Brazil ’s real fell to a five-month low as the devaluation of Argentina’s peso fueled aversion to emerging-market currencies.
The real depreciated 0.1 percent to 2.4030 per U.S. dollar at 3:21 p.m. in Sao Paulo, extending its weekly decline to 2.6 percent, the biggest since Nov. 8. Swap rates on contracts maturing in January 2015 decreased two basis points, or 0.02 percentage point, to 11.14 percent, reducing the increase this week to 22 basis points.
Brazil’s currency dropped for a fifth straight day as Argentina said it will ease currency controls after the peso fell the most in 12 years. Argentina tried to stave off an economic crisis as the central bank’s foreign reserves tumbled to a seven-year low while Turkey sold dollars to prop up the lira and South Africa’s rand declined to a five-year low.
“We see today a continuation of yesterday’s global aversion to emerging economies,” Luis Otavio de Souza Leal, the chief economist at Banco ABC Brasil SA in Sao Paulo, said in a phone interview. “Argentina has an important commercial flow with Brazil, and with its currency trading much lower, that could have an impact.”
Argentines will be able to buy dollars for savings in line with their income more than two years after first installing restrictions on foreign currency purchases, Cabinet Chief Jorge Capitanich said today in Buenos Aires. Argentina is Brazil’s third-biggest trading partner, with $36.1 billion total trade between the two countries in 2013.
Brazil Inflation
The tumble in the peso yesterday was the biggest since 2002, when Argentina abandoned a one-to-one peg with the dollar after a record $95 billion default.
Brazil’s President Dilma Rousseff advocated for Latin America biggest economy at the World Economic Forum in Davos, Switzerland, saying the government is working with determination to bring inflation to the 4.5 percent midpoint of the central bank’s target range,
The real earlier sank as much as 1.4 percent and pared the decline after Rousseff’s remarks, according to Gustav Gorski, the chief economist at Quantitas Gestao de Recursos.
“The market is starting to forget about Argentina a bit and has returned to the fundamentals,” Gorski said by phone from Sao Paulo. “The speech from Rousseff was pro-market.”
Annual inflation slowed to 5.63 percent through mid-January from 5.85 percent in the prior month, the national statistics agency said yesterday. The median forecast of economists surveyed by Bloomberg was 5.76 percent.
‘Pernicious Expectations’
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.
Pacific Investment Management Co. wrote in an e-mailed report yesterday that the real was a “chronic underperformer” and Brazil’s government is “doubling down” on a failing policy of fiscal spending and subsidized lending from state banks to boost growth.
“A more stable currency would break pernicious expectations of pass-through effects from today’s weakening BRL, and along with the tighter fiscal stance, would significantly change the inflation outlook,” Michael A. Gomez, co-head for emerging markets at Pimco, wrote in the report.
The deficit in Brazil’s current account, the broadest measure of trade in goods and services, widened to $8.7 billion in December from $5.1 billion the previous month, the central bank said in a report distributed today in Brasilia. The gap was bigger than estimated by all 22 economists surveyed by Bloomberg, whose median forecast was for a $6.8 billion deficit. Foreign direct investment in December fell to $6.5 billion from $8.3 billion.
The central bank sold $197 million of foreign-exchange swaps today under a program announced Dec. 18 to support the currency and limit import price increases. Brazil extended the maturity on $1.23 billion of swaps due Feb. 3, raising the amount rolled over to $8.23 billion out of a total of $11 billion. The bank extended maturities in offerings last month on all of the $9.9 billion of contracts due Jan. 2.
To contact the reporters on this story: Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net ; Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net
To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net
The real depreciated 0.1 percent to 2.4030 per U.S. dollar at 3:21 p.m. in Sao Paulo, extending its weekly decline to 2.6 percent, the biggest since Nov. 8. Swap rates on contracts maturing in January 2015 decreased two basis points, or 0.02 percentage point, to 11.14 percent, reducing the increase this week to 22 basis points.
Brazil’s currency dropped for a fifth straight day as Argentina said it will ease currency controls after the peso fell the most in 12 years. Argentina tried to stave off an economic crisis as the central bank’s foreign reserves tumbled to a seven-year low while Turkey sold dollars to prop up the lira and South Africa’s rand declined to a five-year low.
“We see today a continuation of yesterday’s global aversion to emerging economies,” Luis Otavio de Souza Leal, the chief economist at Banco ABC Brasil SA in Sao Paulo, said in a phone interview. “Argentina has an important commercial flow with Brazil, and with its currency trading much lower, that could have an impact.”
Argentines will be able to buy dollars for savings in line with their income more than two years after first installing restrictions on foreign currency purchases, Cabinet Chief Jorge Capitanich said today in Buenos Aires. Argentina is Brazil’s third-biggest trading partner, with $36.1 billion total trade between the two countries in 2013.
Brazil Inflation
The tumble in the peso yesterday was the biggest since 2002, when Argentina abandoned a one-to-one peg with the dollar after a record $95 billion default.
Brazil’s President Dilma Rousseff advocated for Latin America biggest economy at the World Economic Forum in Davos, Switzerland, saying the government is working with determination to bring inflation to the 4.5 percent midpoint of the central bank’s target range,
The real earlier sank as much as 1.4 percent and pared the decline after Rousseff’s remarks, according to Gustav Gorski, the chief economist at Quantitas Gestao de Recursos.
“The market is starting to forget about Argentina a bit and has returned to the fundamentals,” Gorski said by phone from Sao Paulo. “The speech from Rousseff was pro-market.”
Annual inflation slowed to 5.63 percent through mid-January from 5.85 percent in the prior month, the national statistics agency said yesterday. The median forecast of economists surveyed by Bloomberg was 5.76 percent.
‘Pernicious Expectations’
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.
Pacific Investment Management Co. wrote in an e-mailed report yesterday that the real was a “chronic underperformer” and Brazil’s government is “doubling down” on a failing policy of fiscal spending and subsidized lending from state banks to boost growth.
“A more stable currency would break pernicious expectations of pass-through effects from today’s weakening BRL, and along with the tighter fiscal stance, would significantly change the inflation outlook,” Michael A. Gomez, co-head for emerging markets at Pimco, wrote in the report.
The deficit in Brazil’s current account, the broadest measure of trade in goods and services, widened to $8.7 billion in December from $5.1 billion the previous month, the central bank said in a report distributed today in Brasilia. The gap was bigger than estimated by all 22 economists surveyed by Bloomberg, whose median forecast was for a $6.8 billion deficit. Foreign direct investment in December fell to $6.5 billion from $8.3 billion.
The central bank sold $197 million of foreign-exchange swaps today under a program announced Dec. 18 to support the currency and limit import price increases. Brazil extended the maturity on $1.23 billion of swaps due Feb. 3, raising the amount rolled over to $8.23 billion out of a total of $11 billion. The bank extended maturities in offerings last month on all of the $9.9 billion of contracts due Jan. 2.
To contact the reporters on this story: Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net ; Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net
To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net
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