Brazil Real Drops as Central Bank Considers Swap Rollover Demand

Brazil’s real fell as the central bank studied demand for foreign-exchange swap rollover auctions, indicating it may pare back support for the currency.

The real depreciated 0.2 percent to 2.1746 per U.S. dollar at 10:23 a.m. in Sao Paulo. Swap rates on contracts due in January 2015 climbed two basis points, or 0.02 percentage point, to 10.53 percent.

The central bank said in a statement on its website that it will consider today whether the market supports holding auctions tomorrow and Oct. 23 and 24 to roll over $8.9 billion in currency swaps. The real has rallied 12 percent since policy makers announced on Aug. 22 a $60 billion program of currency swap and credit line offerings to support the currency and curb import price increases. That is the biggest gain among all of the world’s currencies, making exports more expensive.

“The central bank’s study opens the door to not rolling over the swaps, which generates speculation,” Luciano Rostagno, the chief strategist at Banco Mizuho do Brasil in Sao Paulo, said in a telephone interview. “The real has strengthened a lot, and there’s the government’s perception that it’s not benefiting exports.”

To contact the reporters on this story: Blake Schmidt in Sao Paulo at bschmidt16@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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