The real climbed 0.6 percent to 2.2106 per dollar at the close of trade in Sao Paulo, erasing its decline earlier today. It fell yesterday to 2.2236, the weakest level since June 24. Swap rates on contracts maturing in January 2016 declined two basis point, or 0.01 percentage point, to 11.11 percent today.
Brazil’s central bank said last week that it will extend daily support for the currency for at least another six months as part of an effort to curb inflation. That decision has helped the real extend its 2014 gain to 6.7 percent, the most among 31 major currencies.
“The real is completely out of its normal trend due to the intervention,” Hideaki Iha, a currency trader at Fair Corretora de Cambio e Valores in Sao Paulo, said in a telephone interview. Traders buy the real when it falls, knowing that the central bank will support the currency, he said.
To bolster the real and limit import price increases, the central bank sold $198.9 million of currency swaps today and extended the maturity on contracts worth $346.8 million.
Central bank president Alexandre Tombini said July 1 that Brazil’s annual inflation will close the year within the official target of 2.5 percent to 6.5 percent.
Consumer prices in Brazil climbed 0.47 percent in the month through mid-June, the slowest pace since September, as food and beverage increases eased.
The real dropped earlier today after Rousseff gained support for her re-election bid for the first time this year in a Datafolha poll as the World Cup shifted attention away from slower growth and accelerating inflation. The currency also fell as a U.S. payrolls gain in June added to speculation that the Federal Reserve will curtail stimulus.
Rousseff’s backing among voters before the Oct. 5 vote rose to 38 percent from 34 percent in June, according to the Datafolha poll, which was published yesterday on Folha de Sao Paulo’s website. The July 1-2 survey of 2,857 people has a margin of error of 2 percentage points.
In the U.S., employers added more workers than projected in June and the jobless rate decreased to an almost six-year low of 6.1 percent. The addition of 288,000 jobs followed a 224,000 gain in the prior month that was bigger than previously estimated, Labor Department figures showed today.
To contact the editors responsible for this story: Brendan Walsh at email@example.com Dennis Fitzgerald, Bradley Keoun