Brazil’s real led losses among major currencies as a decline in formal job creation added to concern growth at Latin America’s largest economy is faltering.
The real fell 0.3 percent to 2.2687 per dollar at the close. Swap rates, a gauge of expectations for interest-rate moves, increased 10 basis points, or 0.10 percentage point, to 11.52 percent on contracts maturing in January 2017.
Brazil’s economy created 11,796 formal jobs in July, less than half the pace of the previous month, according to a Labor Ministry report called CAGED. Investors also weighed the outlook for presidential elections after Marina Silva began her campaign as a candidate. The real has risen 4.1 percent this year partly on bets that a new administration would bolster growth.
“The Caged report is another report to show that the economy is weak,” Paulo Petrassi, manager at Leme Investimentos, said in a telephone interview.
The economy has become a central theme in the election as analysts surveyed by Bloomberg estimate gross domestic product contracted during the second quarter as the inflation rate ended the period above the upper limit of the target range.
In her first news conference as a presidential candidate, Silva decried the combination of low growth, inflation and high interest rates that fuel inequality and hamper Brazil’s economic development. Silva repeated her commitment to inflation targeting, a floating exchange rate and the primary surplus, and defended a formal central bank autonomy.
“A free central bank is a major issue that could influence the way investors see Brazil,” Reginaldo Galhardo, a foreign exchange manager at Treviso Corretora de Cambo in Sao Paulo, said in a phone interview.
Yesterday, Brazil’s currency slumped after Federal Reserve minutes showed officials came closer to agreement on an exit strategy from aggressive stimulus, raising the possibility that it might occur sooner than anticipated.
Fed Chair Janet Yellen will speak tomorrow at the Fed Bank of Kansas City’s economic symposium in Jackson Hole, Wyoming. European Central Bank President Mario Draghi will also speak.
To support the currency and limit import prices, the central bank sold swaps worth $197 million under an intervention program due to expire in December and rolled over $494.1 million worth of contracts.
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