Brazilian Real Touches One-Month High on Speculation China to Spur Growth
Brazil’s real advanced to the strongest level in a month as speculation China may act to spur domestic demand drove up commodity prices and boosted global growth optimism.
The real gained 1.7 percent to 1.8024 per dollar at 4:28 p.m in Sao Paulo, from 1.8332 yesterday. It earlier touched 1.7950, the strongest level since Dec. 8.
Brazil’s real outperformed major currencies and emerging- market peers today after import growth in China, Brazil’s biggest trading partner, fell to a two-year low in December, spurring bets the government will use monetary easing to boost domestic demand. Commodities rose as investors wagered that Brazilian exports such as iron ore and sugar will benefit from stimulus in China.
“China gave the signal that it’s going to stimulate the economy,” Felipe Brandao, emerging-markets strategist at ICAP Brasil, the third-largest currency broker on the BM&F Bovespa exchange, said in a telephone interview. “The markets are more optimistic this year with the expectation of an accord in Europe and the U.S. economy gaining confidence.”
Brazilian President Dilma Rousseff’s administration estimates the real will strengthen beyond 1.80 per dollar this year, a government official with knowledge of internal discussions on the issue said yesterday.
The government expects the euro region to start recovering from its current crisis in the second half of 2012, which will help weaken the dollar against other currencies, said the official, who asked not to be identified because the government doesn’t officially forecast currency moves.
Interest-Rate Futures
Yields on Brazilian interest-rate futures contracts fell as traders speculated inflation will slow this year, giving the central bank more room to lower borrowing costs. The yield on the contract due in January 2013 fell four basis points, or 0.04 percentage point, to 10.00 percent, the lowest level in more than two weeks.
“The inflation numbers are getting weaker,” Newton Rosa, chief-economist at SulAmerica Investimentos, said in a telephone interview from Sao Paulo. “The central bank’s scenario is being confirmed.”
Economists covering Brazil lowered their 2012 inflation forecast for a sixth straight week in a report released yesterday. Consumer prices will increase 5.31 percent this year, according to the median forecast in a Jan. 6 central bank survey of about 100 economists, from a forecast of 5.32 percent the previous week.
To contact the reporters on this story: {Josue Leonel} in Sao Paulo at jleonel@bloomberg.net; {Gabrielle Coppola} in Sao Paulo at gcoppola@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net
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