Brazil’s real rose, erasing earlier losses, after Finance Minister Joaquim Levy said it’s too early to reduce a key budget target as Latin America’s largest economy heads toward the worst recession in 25 years.
The real was set for the biggest quarterly gain among major currencies in the region as the administration made progress in winning legislative support for fiscal measures designed to preserve the nation’s credit rating. Levy said Tuesday the government can take other steps after reports indicated that it would cut the surplus target before interest payments from the current 1.1 percent of gross domestic product.
“Levy’s comments were well-received by the market,” Joao Paulo de Gracia Correa, a foreign-exchange superintendent at SLW Corretora de Valores, said in a telephone interview from Sao Paulo.
Brazil’s currency appreciated 0.2 percent to 3.0754 per U.S. dollar at the close of trade in Sao Paulo, extending its rally since March 31 to 3.9 percent.
The real fell 1.1 percent earlier Tuesday as an official said Senator Romero Juca is proposing a primary surplus target of 0.6 percent of GDP while another said Levy believes 0.8 percent would be more acceptable to the market. The officials asked not to be identified because discussions aren’t public.
Moody’s Investors Service, which rates Brazil at the second-lowest investment grade, cited a stalled economy and fiscal challenges when it put the South American country on negative outlook in September.
Swap rates, a gauge of expectations for changes in borrowing costs, dropped 0.08 percentage point to 13.84 percent on the contract maturing in January 2017.
In a sign of reduced concern over the real’s fluctuations, the central bank extended the maturity on 5,200 contracts Tuesday, down from 6,300 earlier this month and 8,100 in May.