Brazilian Real Posts Best Month Since 2003 Amid Rate Fixing

  • Currency was volatile as players tried to move Ptax rate
  • Primary deficit may exceed 150b reais next year, Estado says

Brazil’s real extended its best monthly gain since 2003 in a volatile day as traders speculated that banks are buying dollars in an attempt to control the central bank rate used in settling some financial contracts.

The currency gained 0.2 percent to 3.2130 per dollar on Thursday, after dropping as much as 0.8 percent earlier, leaving it up 11 percent this month. This is the best monthly rally since 2003 and makes the real the best performing currency in the world this year.

The currency has led gains among major peers in June as commodities rallied and speculation grew that Acting President Michel Temer would revive growth in Latin America’s largest economy. The last day of the month in Brazil is a reference for the settlement of many derivative contracts and traders look more closely at the central bank currency rate, known as Ptax.

The real was earlier driven by players’ moves trying to influence the Ptax rate and on afternoon began following the external scenario, says Jefferson Rugik, foreign-exchange manager at Correparti Corretora de Cambio. A gauge of emerging market currencies was up 0.1 percent.

Meanwhile, Brazil will reduce the 2018 inflation target to as low as 4 percent, from the current 4.5 percent goal, according to a report in Valor Economico. On the fiscal front, the deficit excluding interest payments may exceed 150 billion reais ($46 billion) next year, according to O Estado de S. Paulo newspaper. Officials had said previously that the 2017 target would be above 100 billion reais.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.06 percentage point to 12.88 percent.

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