Brazilian Real Advances After Intervention Program Is Extended

Brazil’s currency advanced for a fifth day after the central bank announced that it was extending its program controlling the real.

The currency gained 0.2 percent to 2.2249 per U.S. dollar at the close of trade in Sao Paulo. Swap rates on contracts maturing in January 2017 increased two basis points, or 0.02 percentage point, to 11.56 percent.

The central bank announced June 6 that it was extending its intervention bolstering the currency and limiting import price increases. Brazil sold $198.8 million of foreign-exchange swaps today under the program that had been due to expire at the end of this month and rolled over contracts worth $494.3 million.

“By extending the program, the central bank made clear it doesn’t want to see volatility in the currency,” Juliano Ferreira, an analyst at Icap do Brasil in Sao Paulo, said by phone. “That has calmed down the market for the short term.”

Central bank President Alexandre Tombini cited last month a “certain drop in demand” for currency swaps, encouraging some traders to speculate that he would cut back the program.

The real has gained 6.2 percent this year, advancing partly on speculation that President Dilma Rousseff will face a runoff following October’s vote after overseeing a stalled economy and faster inflation.

Economists cut their 2014 annual growth forecast to 1.44 percent from 1.50 percent, according to the median of about 100 estimates in a central bank survey published yesterday.

Brazil held the target lending rate at 11 percent on May 28 after increasing it from a record low 7.25 percent over nine consecutive meetings beginning April 2013 to curb inflation.

The Getulio Vargas Foundation said today that producer, construction and consumer prices declined 0.64 percent in the 10 days starting May 21, more than the 0.34 percent decrease forecast by economists surveyed by Bloomberg.

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