Brazil’s Swap Rates Drop on China Growth Concern; Real Declines

Brazil’s swap rates fell for a third day as economic growth concern in China, the South American nation’s biggest trading partner, bolstered bets that the central bank will keep borrowing costs at record lows.

Swap rates on the contract due in January 2015 dropped three basis points, or 0.03 percentage point, to 7.71 percent at 10 a.m. in Sao Paulo and have fallen the same amount this week. The real depreciated 0.3 percent to 2.0342 per dollar, leaving it little changed since Jan. 4.

Traders speculated Brazil’s policy makers will leave the benchmark Selic rate unchanged on Jan. 16 as concern China’s economic recovery may falter overshadowed a report yesterday showing Brazil’s consumer prices rose last month more than forecast. China’s inflation accelerated in December, limiting room for monetary easing to support the economic recovery.

“Economic data abroad is not good, and this is pushing rate futures down,” Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA in Sao Paulo, said in a phone interview. “In Brazil, on one side economic activity is weak and on the other inflation remains high, which should prompt the central bank to keep the Selic stable.”

China’s consumer price index increased 2.5 percent in December from a year earlier after a 2 percent gain in the prior month, the National Bureau of Statistics reported today. The median forecast of 42 economists surveyed by Bloomberg was for a 2.3 percent advance.

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

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

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