Brazil’s Real Leads Global Gains on Optimism Over Levy Comments

Brazil’s real led global currency gains on speculation Finance Minister Joaquim Levy will balance the budget and restore growth after he said the government is evaluating its spending.

The real climbed 1.2 percent to 2.6432 per dollar at the close of trade in Sao Paulo, the biggest advance among 31 major currencies tracked by Bloomberg. Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in borrowing costs, decreased 0.11 percentage point to 12.47 percent.

Levy pushed the currency higher when he told reporters in Brasilia today that seeking to cut gross debt below 50 percent in the long term would be a positive step. Concern that Brazil’s fiscal deterioration would lead to a reduced credit rating helped push the real down 11 percent in 2014.

“Pledging more fiscal austerity is helping to boost the currency,” Joao Paulo de Gracia Correa, a trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in an e-mailed response to questions.

The government announced on Dec. 29 cuts to pension and unemployment benefits that will save an estimated 18 billion reais ($6.8 billion). A week later, Levy signaled that he could increase tax revenue to help achieve a “necessary” budget rebalancing.

To support the real and limit import price increases, the central bank sold the equivalent of $98.2 million of currency swaps today and rolled over contracts worth $490.4 million.

One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, remained the highest among 16 major currencies tracked by Bloomberg after Norway’s krone.

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