Brazil Real Gains Amid Speculation Banks Pushing Down Ptax Rate

  • Fixing rate known as PTAX is set by the central bank daily
  • Real leads gains among 24 emerging-market currencies

Brazil’s real advanced the most among developing-nation currencies amid speculation banks are selling dollars in an attempt to lower the central bank rate used in settling some financial contracts.

The real gained 1.5 percent to 3.8487 per dollar Thursday in Sao Paulo, after falling as much as 1.3 percent. It was the best performer among 24 emerging markets currencies tracked by Bloomberg.

The central bank currency rate, known as Ptax, is calculated every business day based on data collected from banks and brokerages, but the last day of the month becomes a reference for the settlement of many derivative contracts in Brazil’s local market. Some banks might have bet the real would be trading at a stronger level this month, so it’s in their interest to try to bolster the local currency, according to Reginaldo Siaca, a currency manager at TOV Corretora de Cambio in Sao Paulo.

"Big banks and local players come to market at the end of every month and try to influence trading with the currency," Siaca said. "Liquidity in foreign-exchange trading is lower in the afternoon, so banks attempting to influence the rate have higher chances of impacting it."
The real also got a boost from data showing Brazil’s nominal budget deficit, which includes expenditures and interest costs, was at 77.3 billion reais in September, less than the 78.6 billion reais median forecast of seven economists surveyed by Bloomberg.

Thursday’s gain left the real down 31 percent this year, still the worst performance in emerging markets. The currency fell earlier on renewed concern President Dilma Rousseff will struggle to win support for measures designed to ward off another credit-rating cut after Standard & Poor’s reduced the country to junk last month.

The country’s lower house delayed a vote expected for Wednesday on a bill to encourage the repatriation of overseas assets, which if passed would mark a victory for the president. It was also fell along with other emerging-market currencies after Federal Reserve comments bolstered wagers on higher U.S. interest rates this year.

While the Fed ponders hikes as soon as December, keeping Brazil’s interest rates on hold is enough to bring inflation back to target despite risks from fiscal policy and a weaker currency, central bank policy makers said in minutes of last week’s meeting published Thursday. The central bank no longer expects inflation to converge to its 4.5 percent target by the end of next year, policy makers said said.

Latin America’s biggest economy held its benchmark rate at 14.25 percent for a second straight meeting on Oct. 21 as the country struggles with the deepest recession in more than two decades and the fastest price rises in a dozen years.

Swap rates on the contract maturing in January 2017, a gauge of expectations for Brazil’s interest-rate moves, were unchanged at 15.38 percent.

Before it's here, it's on the Bloomberg Terminal.