Brazil’s real led gains in major currencies amid speculation the government will present new measures to pare budget deficits and preserve the nation’s credit rating.
Brazil’s Finance Minister Joaquim Levy is working on a plan to raise an additional 30 billion reais ($9.4 billion) in government revenue this year as he strives to meet fiscal targets, according to a government official familiar with the situation. The real also rose along with other emerging-market currencies as China’s government intervened to curb a rout in stocks and Greece proposed changes that met most demands from creditors.
The real appreciated 1.9 percent to 3.1602 per dollar at the close of trade in Sao Paulo, paring its weekly decline to 0.8 percent. The daily gain was the biggest among 16 major tenders tracked by Bloomberg.
“It would be good to see the government showing alternatives to raise funds,” Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo, said in a telephone interview.
The budget strategy entails collecting about 25 billion reais by allowing Brazilians to repatriate money without facing criminal charges, said the official, who asked not to be identified because discussions are private. Brazil would raise an additional 5 billion reais by creating incentives for people and companies to pay off late taxes, the official said.
The new fiscal measures would add to a 69.9 billion real spending freeze announced in May.
Brazil’s Congress defied President Dilma Rousseff when it approved legislation this week that raises government expenditures on retirement benefits.
The local currency slid Wednesday as China’s equity meltdown triggered a plunge in the price of Brazil’s iron-ore exports. Thursday was a holiday in Sao Paulo.
Swap rates, a gauge of expectations for changes in Brazil’s borrowing costs, dropped 0.10 percentage point to 13.56 percent Friday on the contract maturing in January 2017. They were down 0.16 percentage point since July 3.
The central bank extended the maturity on 6,000 currency swap contracts. Last week, it lowered the total amount offered in a rollover from 7,100.