Brazil’s real headed for a third week of declines as the central bank refrained from intervening to strengthen the currency as the dollar rallied on speculation the Federal Reserve will scale back stimulus measures.
The currency depreciated 0.4 percent to 2.0337 per dollar at 10:43 a.m. in Sao Paulo, extending its decline this week to 0.6 percent. Swap rates on the contract due in January 2015 climbed seven basis points, or 0.07 percentage point, to 8.54 percent. They have risen 19 basis points since May 10, the biggest five-day increase since April 12.
The real dropped against the dollar along with all of the other major currencies after San Francisco Fed President John Williams said the U.S. central bank may reduce its $85 billion monthly bond-buying program in the next few months. Brazil’s policy makers have swung this year between selling currency swaps to prevent the real from falling too quickly and offering reverse currency swaps to protect exporters by reining in gains.
“There’s a general appreciation of the dollar in the external markets,” Jose Carlos Amado, a currency trader at Renascenca DTVM in Sao Paulo, said in a telephone interview. “If the central bank just sits there watching and does nothing, the real could slip.”
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