Brazil Real Rises as Intervention Plan Overshadows Fed Concern

Brazil’s real climbed for a fourth straight day as the central bank’s plan for more intervention to bolster the currency in 2014 overshadowed concern that the U.S. Federal Reserve will begin curtailing stimulus.

The real appreciated 0.4 percent to 2.3195 per U.S. dollar at the close in Sao Paulo. Swap rates on contracts maturing in January 2017 increased two basis points, or 0.02 percentage point, to 11.99 percent.

Brazil’s central bank President Alexandre Tombini said on Dec. 10 that details of the currency program for 2014 will be announced this week. In the U.S., the Federal Reserve will probably start reducing asset purchases at its two-day policy meeting starting today, according to 34 percent of economists surveyed by Bloomberg on Dec. 6.

“Investors are watching what the Fed will do and also looking at the odds that, after the Fed’s meeting, Brazil’s central bank will announce its currency program,” Italo Abucater, foreign-exchange manager at ICAP do Brasil in Sao Paulo, said in a telephone interview.

The real has fallen 4.4 percent in the fourth quarter on speculation Brazil’s fiscal deterioration will lead to a reduced credit rating and amid speculation the Fed will soon start reducing stimulus. The drop in the currency is the biggest among 16 major counterparts tracked by Bloomberg after the Australian dollar.

Brazil sold foreign-exchange swaps worth $496 million today as part of a $60 billion intervention to support the real and curb import price increases and also rolled over contracts worth $989 million.

Standard & Poor’s and Moody’s Investors Service lowered their outlooks this year on Brazil’s credit rating, which both have at two levels above junk. The government’s budget deficit as a percentage of gross domestic product swelled to 3.4 percent in October, the widest since 2009.

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