Brazilian Real Rises on Speculation Rousseff Will Reassure Levy

Updated on
  • Finance minister seen regaining influence amid budget discord
  • Currency had fallen to 12-year low on concern he was exiting

Brazil’s real climbed from a 12-year low as speculation eased that Finance Minister Joaquim Levy was preparing to leave his post amid budget turmoil.

The currency rose for the first time in five days on bets that President Dilma Rousseff will reassure Levy at a meeting Thursday afternoon that she supports his efforts to shore up finances and avoid a junk credit rating. While Levy is canceling his trip to the Group of 20 meeting in Turkey, he will probably stick with plans to visit Madrid and Paris.

“There is talk in the market that he will add to his power within the government,” Mario Battistel, a currency trader at Fair Corretora de Cambio e Valores, said from Sao Paulo. “The concern in the market was that he was losing influence.”

The real appreciated 0.6 percent to 3.7403 per dollar after closing Wednesday at the weakest level since December 2002. Swap rates fell 0.09 percentage point to 14.71 percent on the contract maturing in January 2017 a day after the central bank refrained from raising borrowing costs for the first time in eight meetings.

The administration got a boost when Brazil’s lower house approved text of a bill that would increase taxes on banks’ profit to 20 percent from 15 percent until the end of 2018.

Rousseff told reporters this week that Levy isn’t isolated even after several of his recent proposals aimed at avoiding a sovereign credit-rating downgrade were blocked.

Canceled Auction

The Treasury cited market conditions when it canceled an auction of local fixed-rate government bonds for the first time in 19 months as a selloff in the country’s assets pushed borrowing costs to a six-year high.

Yields on local bonds maturing in 2017 dropped 0.06 percentage point to 14.75 percent after increasing Wednesday to the highest since December 2008.

The central bank held the target lending rate at an eight-year high of 14.25 percent after seven straight increases totaling 3.25 percentage points. The
decision was unanimous, and policy makers reiterated a pledge to leave borrowing costs at the current level for a prolonged period to bring inflation down to 4.5 percent by the end of 2016.

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