Brazil’s real closed little changed as speculation President Dilma Rousseff will appoint an economic team that can restore growth offset concern that the U.S. Federal Reserve will begin raising interest rates.
The currency declined less than 0.1 percent to 2.4619 per U.S. dollar at the close of trade in Sao Paulo after gaining as much as 1.5 percent earlier in the day. Swap rates, a gauge of expectations for changes in borrowing costs, rose 0.05 percentage point to 11.83 percent on the contract due in January 2016 as Brazil’s central bank prepared to release its semi-monthly statement on borrowing costs today.
In the U.S., the Fed confirmed it will end a program of asset purchases that has added $1.66 trillion to its balance sheet and bolstered demand for emerging-market assets. The statement said policy makers had observed “solid job gains and a lower unemployment rate.”
“The real reversed trend and started falling after investors read the Fed’s statement as a sign that they might raise rates sooner than later,” Juliano Ferreira, an analyst at Icap do Brasil in Sao Paulo, said in a telephone interview.
One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, was the highest among 16 major currencies tracked by Bloomberg. The real led global gains earlier today as investors awaited Rousseff’s economic appointments.
Rousseff said in a televised interview on SBT Brasil last night that she wouldn’t discuss a replacement for Finance Minister Guido Mantega, who is preparing to leave his post. The president told Jornal da Band TV that she is committed to restoring investor confidence before her second term starts.
“Expectations remain high regarding announcements of economic plans by the president,” Ricardo Gomes da Silva, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, wrote in a e-mailed message to clients. “If she delays delivering action awaited by investors, high volatility in trading should be back.”
All except one of the 54 economists surveyed by Bloomberg expect the central bank to keep the benchmark lending rate at 11 percent for a fourth straight meeting today, with one analyst predicting an increase to 11.25 percent.
Policy makers raised the Selic by 3.75 percentage points in the year through April to a two-year high in an effort to curb inflation. The central bank is scheduled to announce its decision after 6 p.m. local time.
Brazil sold the equivalent of $197.7 million of swap contracts in an auction today as part of an intervention begun last year to support the currency and rolled over contracts worth $393.2 million. The nation attracted a foreign-exchange net inflow of $3.7 billion in the five days ended Oct. 24.