Brazilian Swap Rates Climb as Real Falls for Third Straight Day

Brazil’s swap rates rose as the central bank limited rollovers of foreign-exchange swaps, weakening the real and adding to speculation that policy makers will raise the target rate to 10 percent to curb inflation.

Swap rates on the contract due in January 2017 jumped 10 basis points, or 0.10 percentage point, to 11.40 percent at 10:17 a.m. in Sao Paulo, the biggest increase since Oct. 21. They are down two basis points for the month. The real fell for a third straight day, depreciating 0.3 percent to 2.1972 per dollar, paring its rally in October to 1.1 percent.

Brazil’s currency fell today as the central bank extended the maturities on only about $6 billion of the $8.9 billion of foreign-exchange swaps maturing Nov. 1 in rollover auctions over the past two weeks. The real has rallied 11 percent, the most in the world, since policy makers announced on Aug. 22 a program of swaps and credit lines to buoy the currency and curb import price increases.

“The real is reacting to the fact that the swap rollover is less than expected,” Paulo Nepomuceno, the chief economist at Coinvalores CCVM, said by phone from Sao Paulo.

Brazil’s currency also weakened as the U.S. Federal Reserve saw yesterday signs of economic improvement, fueling concern that it will curtail a stimulus program that has buoyed emerging-market assets.

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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