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Brazilian Real Rises Most in Week as Central Bank Sells Swaps

June 5 (Bloomberg) -- Brazil’s real rallied, snapping a five-day slide, as the central bank offered currency swap contracts for a sixth day since mid-May.

The central bank sold 20,300 out of the 40,000 currency swap contracts it offered, according to a statement. The real advanced 1.8 percent, the most since May 25, to 2.0225 per dollar after earlier rising as much as 2.1 percent.

“The level that really seems to concern the central bank is 2.1 per dollar,” Vladimir Caramaschi, chief strategist at Credit Agricole Brasil SA Dtvm, said in a phone interview from Sao Paulo. The interventions seek to prevent the European debt crisis from dragging the real down to a level where it fuels inflation concern, he said.

The yield on the Brazilian interest-rate futures contract due in January 2014 fell six basis points, or 0.06 percentage point, to 8.33 percent.

Investors anticipate “that a deceleration abroad could affect Brazil’s economy, opening more space for rate cuts,” Darwin Dib, chief economist at CM Capital Markets Asset Management, said in a phone interview from Sao Paulo. “The market looked abroad for indicators and saw weak numbers in the euro zone.”

Euro-area services and manufacturing output contracted by the most in almost three years in May, adding to signs the economy is suffering under a worsening sovereign-debt crisis, a report today from London-based Markit Economics showed.

G-7 Meeting

Finance ministers and central bank governors from Group of Seven countries agreed to coordinate their response to Europe’s financial crisis. Spain called for outside support for the first time to battle the financial crisis as Budget Minister Cristobal Montoro said European institutions should help shore up the nation’s lenders.

Brazil’s HSBC Purchasing Managers Index for services fell to 49.7 in May from 54.4 in April, Markit Economics said today on its website.

The services index is based on data compiled from monthly replies to questionnaires sent to executives at over 400 companies in the services industry. A reading above 50 indicates an expansion in business activity from the previous month, while a reading below 50 indicates a slowing.

The government sold all 650,000 fixed-rate bonds, known as NTN-Fs, offered at an auction today and 2.65 million of 3.5 million zero-coupon bills, known as LTNs, according to a statement posted on the central bank’s website.

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

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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