The real climbed from its weakest level since 2009 after the central bank intervened for a fourth day this week to stem a selloff.
The currency appreciated 0.7 percent to 2.2422 per dollar at the close in Sao Paulo after falling for five straight days. Swap rates due in January rose six basis points, or 0.06 percentage point, to 9.16 percent, extending their increase since June 14 to 41 basis points.
The real pared its weekly decline to 4 percent, the worst performance among 16 major dollar counterparts tracked by Bloomberg after the Mexican peso and Norwegian krone. The central bank sold currency swap contracts today for $1.8 billion in its eighth day of intervention in three weeks.
“The swap auctions have been good to bring the real more in line with other currencies,” Ronaldo Patah, the superintendent of fixed income at Itau Asset Management, said in a phone interview from Sao Paulo. “The interventions have been positive and with reasonable frequency, which is important for foreign investors.”
Brazil sold 1.9 billion reais ($838 million) of bonds and bought back 25 million reais of inflation-linked debt at an auction called to ease a six-week market rout.
The Treasury sold 88 percent of the zero-coupon bonds it offered while issuing 17 percent of the fixed-rate securities and 67 percent of the inflation-linked bonds.
The buyback offer, the fourth such unscheduled auction since June 13, forms part of the government’s effort to support its bonds amid a global market rout that has intensified in Brazil as nationwide anti-government protests against inflation and corruption turned violent. The Treasury said it will offer to buy back more bonds on June 24.
The real tumbled yesterday to a four-year low of 2.2575 after the U.S. Federal Reserve signaled on June 19 that it may taper a stimulus program that has buoyed demand for emerging-market assets.
Swap rates surged this week on speculation a weakening real will spur the central bank to sustain the pace of increases in borrowing costs to curb inflation.
Consumer prices as measured by the IPCA-15 index rose 0.38 percent in the month through mid-June, the national statistics agency reported today. The median forecast of economists surveyed by Bloomberg was for an increase of 0.36 percent. Annual inflation accelerated to 6.67 percent, higher than the 6.50 percent upper level of the central bank’s target range.
The central bank raised its target lending rate by 50 basis points on May 29 to 8 percent to curb inflation, surprising 38 of 57 economists surveyed by Bloomberg, who had expected a second straight increase of 25 basis points.