Real Declines on Bets Brazil Will Limit Currency Swaps Rollover

Brazil’s real fell on speculation the central bank will limit rollovers of foreign-exchange swaps after the currency posted the world’s biggest two-month rally.

The real depreciated 0.3 percent to 2.1976 per U.S. dollar at 10:05 a.m. in Sao Paulo, the weakest level on a closing basis since Oct. 9. Swap rates on contracts maturing in January 2015 were unchanged at 10.49 percent.

“The central bank doesn’t want the real to gain further,” Newton Rosa, the chief economist at Sul America Investimentos in Sao Paulo, said in a phone interview.

Brazil will offer today as much as $1 billion of currency swaps in a rollover auction after extending the maturities of $1.98 billion in contracts in the past two days. If the central bank sells the maximum amount today, it will roll over about one-third of the $8.9 billion of swaps maturing Nov. 1.

The real has gained 11 percent since Aug. 22, when Brazil announced a $60 billion program of swaps and credit lines to buoy the currency and curb import price increases. The real’s rally also boosts export prices, making the country’s factories less competitive.

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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