Brazil’s real rose to a nine-month high on speculation the government will allow the currency to appreciate to contain inflation and as a drop in U.S. jobless claims buoyed emerging-market assets.
The currency appreciated 0.4 percent to 1.9582 per dollar at close in Sao Paulo, the strongest level since May 10. Swap rates on the contract due in January 2015 rose three basis points, or 0.03 percentage point, to 8.19 percent after an earlier drop of four basis points.
The real has rallied 0.7 percent this week after a Feb. 7 government report showed inflation exceeded the 4.5 percent midpoint of the central bank’s target range for a 29th month.
“It is clear that the central bank does not want a very weak real,” Darwin Dib, the chief economist at CM Capital Markets Asset Management, said by phone from Sao Paulo.
Swap rates dropped earlier today as consumer prices in Sao Paulo rose less than economists forecast, fueling speculation that the central bank will refrain from lifting borrowing costs.
Consumer prices in Brazil’s biggest city rose 1.01 percent in the four weeks ended last week, the Foundation Economics Research Institute reported. The median forecast of economists surveyed by Bloomberg was for a 1.07 percent increase.
Swap rates ended the day higher as ValorPro cited Luiz Fernando Figueiredo, the former central bank monetary policy director, as saying policy makers will have to raise rates as soon as April to control inflation.
The central bank swung in 2012 between selling currency swaps to prevent the real from falling too quickly and offering reverse currency swaps to protect exporters by keeping the real from strengthening beyond 2 per U.S. dollar.
The real rallied to a level stronger than 2 per dollar on Jan. 28 for the first time since July after the central bank renewed $1.85 billion of currency swaps about to expire, refraining from buying dollars to settle the contracts. On Jan. 31, the government exempted foreigners from a tax on real-estate funds traded on the stock exchange, spurring speculation that inflows will help sustain the real.