Brazil Real Advances Before Fed Decision as Swap Rates Decline

Brazil’s real gained amid speculation the U.S. Federal Reserve will decide to maintain most of the stimulus that has buoyed emerging-market assets, bolstering central bank efforts to strengthen the currency.

The real rose 0.2 percent to 2.2523 per dollar at 9:48 a.m. in Sao Paulo after gaining 1.3 percent yesterday, the biggest jump since Sept. 9. Swap rates on the contract due in January 2017 fell two basis points, or 0.02 percentage point, to 11.63 percent.

Fed policy makers meeting today will probably lower the monthly pace of bond purchases by $10 billion, to $75 billion, according to the median response of 34 economists in a Bloomberg News survey on Sept. 6. That’s down from expectations of a $20 billion reduction in a July survey. The real has appreciated 8.4 percent since Aug. 22, when Brazil’s central bank announced a $60 billion intervention program of currency swaps and foreign-exchange credit lines through December.

“Some people in the market think the Fed won’t do anything to reduce stimulus,” said Jose Carlos Amado, a currency trader at Renascenca Corretora in Sao Paulo. “Even if the Fed does do something, the real may fall, but it’s not going to plunge.”

The central bank sold $497 million of foreign-exchange swaps today and plans to roll over up to 55,300 foreign-exchange swap contracts at 10:30 a.m. local time.

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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