Brazilian Real’s Volatility Falls to Year Low Amid Intervention

Brazil’s currency volatility dropped to a one-year low amid speculation the central bank will sustain the pace of its program to support the real.

Three-month historical volatility fell 0.5 percent to 10.62 percent at the close of trading in Sao Paulo, the lowest since June 2013. The currency retreated 0.3 percent to 2.2250 per U.S. dollar.

The central bank announced June 6 that it was extending its foreign-exchange market intervention to support the real and limit import-price increases. The program had initially been scheduled to end this month. Brazil sold $198.7 million of foreign-exchange swaps today and rolled over contracts worth $494.3 million.

“We shouldn’t have much volatility in the near term,” Joao Paulo de Gracia Correa, a currency trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in a telephone interview. “The central bank made clear it doesn’t want to see a major fluctuation in the currency. It will keep the program at a pace similar to what we have seen so far.”

The deficit in the current account, the broadest measure of trade in goods and services, narrowed in May to $6.6 billion from $8.3 billion in the prior month, the central bank reported. Foreign direct investment rose to $6 billion from $5.2 billion.

In the interest-rate futures market, swap rates on contracts maturing in January 2017 declined five basis points, or 0.05 percentage point, to 11.45 percent today.

Economists lowered their growth forecast for gross domestic product this year to 1.16 percent from 1.24 percent a week ago, according to the median of about 100 estimates in a central bank survey published yesterday.

The Labor Ministry reported today that Brazil registered 58,836 new formal jobs in May, the lowest for the month since 1992 and about half the number created in the prior month. The median forecast of economists surveyed by Bloomberg was 88,000.

Slowing expansion of the economy spurred Brazil to hold its benchmark lending rate at 11 percent on May 28 after nine consecutive increases to curb inflation.

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