Brazil’s Real Leads Drop Among Major Currencies on Fed Outlook

Brazil’s real fell the most among major currencies as hiring by U.S. companies added to concern that the Federal Reserve will damp risk demand by raising interest rates sooner than expected.

The real slid 1.7 percent to 2.7417 per dollar at the close of trade in Sao Paulo, the biggest decrease among 16 major currencies tracked by Bloomberg. Swap rates, a gauge of expectations for changes in borrowing costs, climbed 0.05 percentage point to 12.81 percent on the contract maturing in January 2016.

The local tender dropped as a private report showed U.S. companies added more than 200,000 workers to payrolls for a fifth consecutive month in January. Reduced projections for Brazil’s economic growth pushed the real down on Monday.

“U.S. jobs data added to the idea that the economy there is picking up, and that is not good news for emerging-market assets,” Joao Medeiros, a director at Pioneer Corretora de Cambio in Sao Paulo, said in a telephone interview. “And recent macroeconomic numbers from Brazil are not attractive at all. It is a combination of bad factors for the currency.”

The lack of confidence in state-controlled Petroleo Brasileiro SA and speculation over who will be its next chief executive officer heighten concern over Brazil because of the company’s importance to the local economy, Medeiros said.

Petrobras Resignations

Petrobras’s CEO Maria das Gracas Foster and five managers stepped down amid a corruption investigation that has wiped out billions of dollars of the oil producer’s market value and threatens Brazil’s economic revival.

Analysts lowered their forecast for gross domestic product growth for 2015 to 0.03 percent and raised their inflation outlook to 7.01 percent, according to the median of about 100 estimates in a central bank survey published Monday. The official target for inflation is 2.5 percent to 6.5 percent.

To support the currency and limit import price increases, Brazil sold the equivalent of $98 million of swaps and rolled over contracts worth $633.3 million Wednesday.

In the U.S., the Fed has pledged to be “patient” on raising interest rates. While the economy has been expanding at a “solid pace,” inflation is expected to slow further in the near term, policy makers said last week in their statement.

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