Brazil Real Advances on Rate Outlook After Biggest Decline in Four Months

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  • Posted on April 12, 2011


    Brazil’s real rose a day after its biggest selloff in four months on speculation rising interest rates and higher commodity prices will attract investors.

    The real gained 0.5 percent to 1.5758 per dollar as of 9:11 a.m. New York time, from 1.5833 yesterday when it lost 0.9 percent in its biggest decline since December. The currency is up 5.4 percent this year.

    “After a big correction yesterday, the market has sort of found a temporary level that they are comfortable with,” said Tony Volpon, Latin America strategist at Nomura Holdings Inc. in New York. “Based on commodity prices, rate differentials and risk sentiment, the real is well valued around these levels.”

    Traders are betting Brazil’s policy makers will boost benchmark borrowing costs by at least 0.25 percentage point, or 25 basis points, at the April 19-20 meeting, from 11.75 percent, according to Bloomberg estimates based on interest rate futures. The U.S. Federal Reserve’s benchmark interest rate is between zero and 0.25 percent. Prices of commodities, such as sugar and soy, have gained 9.6 percent this year, according to the UBS Bloomberg CMCI index.

    Brazil’s retail sales fell 0.4 percent in February, compared with an increase of 1.1 percent in January, the national statistics agency said today in Rio de Janeiro. The median forecast from 30 economists surveyed by Bloomberg was for the sales to remain unchanged.

    Yields on interest-rate futures contracts due in January 2012 dropped 3 basis points, or 0.03 percentage point, to 12.28 percent.

    To contact the reporter on this story: Ye Xie in New York at yxie6@bloomberg.net

    To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

    Bloomberg/AC



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