Brazil’s Real Posts Weekly Loss on Mantega; Swap Rates Decline

Brazil’s real posted its first weekly drop in September as Finance Minister Guido Mantega said the government may impose taxes on financial transactions to curb speculative foreign investment.

Mantega said in London that the government may act to weaken the real after the Federal Reserve announced last week a third round of stimulus. Possible steps Brazil could take include “measures of taxing financial operations,” he said.

“The market is watching the central bank because there is always the possibility of intervention,” Jose Carlos Amado, a currency trader at Renascenca DTVM Ltda. in Sao Paulo, said in a phone interview. “If dollars start coming in, they may intervene in the spot market.”

The real depreciated 0.5 percent this week. It declined 0.1 percent to 2.0231 per dollar today. Swap rate contracts maturing in January 2014 fell two basis points, or 0.02 percentage point, to 7.78 percent.

Mantega said Brazil’s interest rates will continue to be low, with more room for cuts, and the Fed’s open-ended plan to purchase assets is stimulating currency wars.

“It is very natural that countries defend themselves from the actions that do not necessarily bring them direct economic benefit,” Mantega said. “If there is a great inflow of American currency, we will either have to increase our reserves or intervene in markets.”

The central bank has auctioned $5.7 billion in four reverse currency swaps between Sept. 12 and Sept. 17 in a bid to protect the currency from a dollar weakened by the Fed’s QE3.

The bank has cut the benchmark rate by 5 percentage points since August 2011 to a record-low 7.5 percent, in the biggest rate cuts among G-20 nations. Policy makers will keep the key rate at 7.5 percent before raising 25 basis points as soon as March, trading in swap rates show.

To contact the reporters on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net; Josue Leonel in São Paulo at jleonel@bloomberg.net

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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