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Brazil Real Rises as Intervention Offsets Fed Stimulus Concern

Brazil’s real advanced as central bank President Alexandre Tombini’s plan to extend intervention into 2014 offset speculation that the U.S. Federal Reserve will curtail monetary stimulus.

The real appreciated 0.2 percent to 2.3301 per U.S. dollar at the close in Sao Paulo and was 0.1 percent higher this week. Swap rates on contracts maturing in January 2016 fell three basis points, or 0.03 percentage point, to 11.46 percent and were down 28 basis points since Dec. 6.

Brazil’s currency has fallen 4.9 percent in the fourth quarter, the worst performance among 16 major currencies tracked by Bloomberg, amid speculation fiscal deterioration will lead to a reduced credit rating and on the Fed tapering concern. Tombini reiterated this week at a Senate hearing that the $60 billion intervention program announced in August to support the currency and curb import price increases will be extended into next year.

“The central bank wants to avoid big volatility in this environment,” Italo Lombardi, an economist at Standard Chartered Plc, said by phone from New York.

The Fed may consider reducing its $85 billion of monthly bond purchases at its Dec. 17-18 meeting, according to 34 percent of economists surveyed Dec. 6 by Bloomberg, compared with 17 percent in a Nov. 8 poll.

President Dilma Rousseff’s government approval rating rose to 43 percent from a record low 31 percent in July following protests that brought 1 million demonstrators to the streets, an Ibope poll published by the National Industry Confederation showed today. Ibope polled 2,002 people from Nov. 23-Dec. 2, and the poll had a margin of error of two percentage points.

The seasonally adjusted economic activity index, a proxy for gross domestic product, rose 0.77 percent in October from the previous month after increasing a revised 0.01 percent in the prior month, the central bank said today in a report posted on its website. That was higher than all except one estimate from 27 economists surveyed by Bloomberg.

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