Brazilian Real Advances on Outlook for Rousseff’s Economic Team

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Brazil’s real rose for a second day on speculation President Dilma Rousseff will appoint an economic team that will revive growth and on wagers the U.S. Federal Reserve will avoid an early increase in interest rates.

The currency gained 0.3 percent to 2.5522 per dollar at the close of trade in Sao Paulo after dropping 3.2 percent last week. Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, fell 0.04 percentage point to 12.61 percent on the contract maturing in January 2017.

The real advanced amid optimism that the next finance minister will move away from policies that helped lead Brazil into a recession in the first half of the year. Today’s increase was the biggest among 16 major currencies tracked by Bloomberg after the South Korean won.

“There has been a lot of expectation that a new economic team will be able to restore growth,” Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo, said in a telephone interview.

Abdelmalack said the nomination as finance minister of someone with a “pro-market” view and considered independent such as former central banker Henrique Meirelles would be recognized by investors as a positive move and would help restore confidence in the nation’s economy.

Meirelles is favored by former President Luiz Inacio Lula da Silva, IstoE Dinheiro magazine reported Nov. 9, without saying how it obtained the information. Finance Minister Guido Mantega won’t be returning for Rousseff’s second four-year term.

Jobs Report

The real also climbed today as a Nov. 7 report indicating a smaller-than-forecast increase in U.S. jobs in October reduced the likelihood that the Federal Reserve will raise its benchmark lending rate by October 2015.

To support the currency, Brazil sold the equivalent of $197.4 million of foreign-exchange swaps today as part of an intervention begun last year and rolled over $439.5 million worth of contracts. Latin America’s largest economy posted a trade deficit of $747 million for Nov. 1-9.

Economists cut their 2015 growth forecast to 0.8 percent from a 1 percent projection a week earlier while increasing their outlook for inflation next year to 6.4 percent from 6.32 percent, according to the median of about 100 estimates in a central bank survey published today.

To curb inflation, policy makers unexpectedly raised the target lending rate on Oct. 29 by a quarter-percentage point to 11.25 percent. The decision came three days after Rousseff won re-election by the narrowest margin since at least 1945.

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