Brazilian Real Climbs After Mantega Says Currency Back to Normal

Brazil’s real rose to a one-month high as Finance Minister Guido Mantega said the currency is back to normal after recovering losses.

The currency gained 0.6 percent to 2.2023 per U.S. dollar at close of trade in Sao Paulo, the strongest level since April 09. Three-month historical volatility, a measure of the real’s fluctuation, fell to 11.26 percent, the lowest level since June 2013.

Mantega said today in testimony to lawmakers that “no one talks about turbulence now” regarding the currency of Latin America’s biggest economy. The real has rallied 7 percent this year in the best performance among 24 emerging-market currencies tracked by Bloomberg.

“Mantega is saying the exchange rate has normalized because there is less risk of a large depreciation,” Pedro Tuesta, an economist at 4Cast Ltd., said in a telephone interview from Washington.

Brazil started imposing restrictions on capital flows in 2010 after Mantega accused the U.S., Japan and Europe of sparking a currency war by pushing interest rates toward zero and driving investors to emerging markets. The real rose to a 12-year high of 1.5290 per dollar in July 2011 in a rally that Mantega called a “disaster” for local manufacturers.

The government began abandoning policies to depress the exchange rate last year and moved to support the real with swap auctions after the currency fell to a four-year low of 2.4549 per dollar, a level it almost reached again in January.

Currency Swaps

Brazil sold $198.3 million of foreign-exchange swaps today under a program announced in December to support the currency and limit import price increases. The central bank also rolled over contracts that were due June 2 and worth $247.4 million.

President Dilma Rousseff’s administration should consider implementing measures to prevent capital flight if elected for a second term, Rui Falcao, the coordinator of her campaign, said in an interview yesterday. Elected officials, rather than the appointed central banker, should have the final say in determining monetary policy, Falcao said.

The real has climbed this year partly on speculation Rousseff will face a runoff in the October election after overseeing faltering growth.

In the interest-rates futures market, swap rates on contracts maturing in January 2017 decreased 10 basis points, or 0.10 percentage point, to 12.04 percent today, the lowest level since Dec. 18.

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