Brazil’s Real Advances for Second Day Amid Election ProspectsFilipe Pacheco
Brazil’s real rose for a second day on speculation opposition candidate Marina Silva will beat President Dilma Rousseff in a runoff election.
The currency advanced 0.3 percent to 2.2369 per dollar at the close of trading. Swap rates, a gauge of expectations for interest-rate moves, climbed three basis point, or 0.03 percentage point, to 11.14 percent on the contract maturing in January 2017 before today’s central bank decision.
Speculation that Rousseff will lose her bid for re-election amid a faltering economy has helped to push the real up 5.6 percent in 2014, the most among 31 major currencies tracked by Bloomberg. Silva would win in a second round of elections with 46 percent of votes versus 39 percent for Rousseff, according to an Ibope poll released on O Estado de S. Paulo website today.
“The polls have been an important driver for the currency in the past few weeks,” Reginaldo Galhardo, a foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a telephone interview. “The market is betting on a change of government as a positive thing.”
A Datafolha poll published Aug. 29 showed Silva, a former environment minister, would have 50 percent of voter support in an October second-round vote against Rousseff, who would have 40 percent backing. The survey questioned 2,874 people and has a margin of error of plus or minus two percentage points.
Silva announced last week a campaign platform calling for a reduction in state-subsidized loans, full independence for the central bank, a free-floating exchange rate and a fiscal policy that would help ease inflation.
Traders will be watching to determine if Silva can establish political alliances supporting the changes she’s promising, Galhardo said.
The central bank is expected by economists surveyed by Bloomberg to hold the target lending rate steady today for a third straight meeting. It raised the benchmark by 3.75 percentage points to 11 percent in the year through April to curb above-target inflation.
To support the real and limit import-price increases, Brazil sold foreign-exchange swaps today worth $197.8 million as part of an intervention program. The central bank has refrained from announcing an auction to roll over the $6.68 billion in contracts expiring Oct. 1.
Brazil posted a foreign-exchange net outflow of $3 billion last month as of Aug. 29, compared with $1.8 billion in July, according to data from the central bank. That would be the biggest outflow for a single month since December.