Brazilian Real Climbs on Speculation Rousseff Will Lose Election

Brazil’s real advanced the most among major currencies on speculation President Dilma Rousseff will lose her re-election bid after the national soccer team’s World Cup rout last week amid a stalled economy.

The real climbed 0.3 percent to 2.2143 per U.S. dollar at 3:05 p.m. in Sao Paulo, the biggest increase among 16 major currencies tracked by Bloomberg. Swap rates, a gauge of expectations for interest-rate moves, declined four basis points, or 0.04 percentage point, to 11.42 percent on the contract maturing in January 2017 as economists surveyed by the central bank lowered their outlook for growth.

Speculation that Rousseff, who has overseen the slowest growth of any Brazilian president in two decades, is declining in popularity has helped push the real up 6.7 percent this year, the most among 24 emerging-market currencies. Brazil’s 7-1 defeat to Germany in a World Cup semifinal last week may hurt Rousseff’s standing in voter polls, according to Joao Paulo de Gracia Correa, a foreign-exchange trader at Correparti Corretora de Cambio in Curitiba, Brazil.

“Elections are going to be the main focus for investors now, and the real usually advances when Rousseff declines in polls,” de Gracia Correa said in a telephone interview.

A Datafolha poll conducted July 1-2 before Brazil’s World Cup loss to Germany indicated that Rousseff’s support jumped four percentage points to 38 percent following three straight drops this year. The poll of 2,857 people had a margin of error of 2 percentage points.

Currency Swaps

To support the real and limit import price increases, Brazil sold $198.3 million of currency swaps today and rolled over contracts worth $346.1 million. The central bank plans to keep offering $200 million in swaps each business day at least through the end of the year.

Economists reduced their growth forecast for this year to 1.05 percent from 1.07 percent a week earlier, according to the median of about 100 estimates compiled for a central bank survey published today.

A slowing economy spurred the central bank to hold its target lending rate at 11 percent on May 28 after nine consecutive increases to curb inflation. Policy makers next decide on borrowing costs July 16.

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