Brazil Real Rises as Inflows Headed for Highest Level Since May

Brazil’s real climbed the most in emerging markets as a report showed net currency inflows were headed for their highest level in almost a year.

The real gained 0.7 percent to 2.2219 per dollar, the strongest on a closing basis since April 14. The gain was the biggest among 24 developing-nation currencies tracked by Bloomberg. Swap rates on contracts maturing in January 2017 declined 13 basis points, or 0.13 percentage point, to 12.22 percent.

The central bank posted today net foreign currency inflows of $3.4 billion this month through April 17, which would be the biggest since May 2013. Pacific Investment Management Co., which operates the world’s biggest debt fund, said last week that a plunge in Brazil’s government and corporate bonds has made the securities attractive again.

“There are inflows, and Pimco has been saying it may invest more in Brazil,” Pedro Tuesta, an economist at 4Cast Ltd., said in a phone interview from Washington.

Pimco Deputy Chief Investment Officer Mark Kiesel wrote last week that he sees opportunities in sovereign notes and debt from Brazilian companies including Petroleo Brasileiro SA.

Three months ago, Pimco co-founder Bill Gross said Brazil was no longer a preferred market for the Newport Beach, California-based asset manager.

To support the currency and limit import price increases, Brazil sold $198 million of foreign-exchange swaps today under a program announced in December. It also extended the maturity on contracts worth $493 million.

Inflation Outlook

Finance Minister Guido Mantega told reporters in Brasilia that inflation accelerated recently because of seasonal reasons and the impact of drought on the food supply. He said the pace of consumer price increases will slow in May and June.

Economists increased their 2014 inflation forecast to 6.51 percent from the prior week’s outlook of 6.47 percent, according to the median of about 100 estimates in a central bank survey published yesterday. The official target is 4.5 percent plus or minus 2 percentage points.

The central bank has raised its target lending rate nine consecutive times in the past year to 11 percent to curb inflation. The number of increases is the most among 49 central banks tracked by Bloomberg.

To contact the reporter on this story: Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Dennis Fitzgerald, Richard Richtmyer

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