Brazil’s real climbed to a one-week high as the central bank prepared to hold the first of three auctions this week to extend maturities on foreign-exchange swaps that supported the world’s biggest two-month rally.
The real advanced 0.2 percent to 2.1833 per dollar at 10 a.m. in Sao Paulo, the strongest level on a closing basis since Oct. 22. Swap rates on the contract due in January 2017 fell four basis points, or 0.04 percentage points, to 11.24 percent, the lowest level since Oct. 11.
Policy makers said in a statement last week that they plan to offer foreign-exchange swaps in rollover auctions over three days beginning today. The real posted its first weekly decline this month after the central bank extended the maturities in sales Oct. 22-24 on only about one-third of the $8.9 billion of swap contracts maturing Nov. 1.
“The central bank is using currency swaps to manage the market,” Jose Carlos Amado, a currency trader at Renascenca Corretora in Sao Paulo, said in a telephone interview. “People are getting used to this situation. Whenever the dollar gets close to 2.15 reais, people buy it, and when it rises to 2.20 reais, they sell.”
The currency has gained 12 percent since Aug. 22, when policy makers announced a $60 billion program of swaps and credit lines to buoy the currency and curb import price increases. The rally also makes the country’s factories less competitive by boosting export prices.
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