Brazil’s currency climbed as Greece’s progress in meeting the terms of its bailout program revived demand for emerging-market assets.
The real gained 1.4 percent to 3.0197 per dollar in Sao Paulo after tumbling 2.9 percent Monday to the lowest level in a week.
“The cool-off in Greece related to downside pressures is driving capital back into emerging-market currencies,” Ipek Ozkardeskaya, an analyst at London Capital Group, said in an e-mailed reply to questions. “This is a partial improvement in risk appetite as emerging markets see limited inflows.”
Developing-nation currencies rose as Greece said it will surmount another hurdle when it repays about 750 million euros ($841 million) to the International Monetary Fund. In Brazil, Finance Minister Joaquim Levy has pledged to convert 2014’s primary budget deficit into a surplus of 1.2 percent of gross domestic product by year-end. The gap, which excludes interest payments, expanded to 0.7 percent of GDP in March, leaving Brazil at risk of missing its goal, Standard & Poor’s said.
“We’re in May and it doesn’t look very good,” Roberto Sifon Arevalo, managing director of sovereign ratings for the Americas, said in an interview in Sao Paulo. Fiscal accounts are “a bit worse than we expected,” he said.
Two decrees that cut social security spending by as much as 14.5 billion reais ($4.8 billion) lapse June 1 if they don’t pass Congress. A separate bill to raise 12.8 billion reais in corporate-payroll taxes this year has stalled.
One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, was 20 percent, down from a one-month high May 5. Its swings were still the widest among 16 major currencies tracked by Bloomberg.
The central bank extended the maturity of 8,100 foreign-exchange swap contracts worth $395.2 million. Sale of the swaps supporting the real was halted in March.
Swap rates, a gauge of expectations for Brazil’s borrowing costs, increased 0.01 percentage point to 13.56 percent on the contract maturing in January 2017.