Brazil's Real Fluctuates Ahead of Central Bank Currency Fixing

  • Currency rises on speculation lenders pushing up Ptax rate
  • Fixing rate known as Ptax is set by the central bank daily

Brazil’s real led gains in Latin America on speculation banks were selling dollars in an attempt to control the central bank rate used in settling some financial contracts at the end of the month.

The real rose as some traders might have bet it would be at a stronger level this month and are trying to bolster the local currency, said Leonardo Monoli, a partner at Jive Asset Gestao de Recursos in Sao Paulo. The central bank currency rate, known as Ptax, is calculated every business day based on data collected from banks, but the last day of the month becomes a reference for the settlement of many derivative contracts in the local market.

“The currency is being heavily influenced by the end-of-the-month positioning in the Ptax,” Monoli said.

The Brazilian real posted its third straight monthly decline as President Dilma Rousseff struggles to put the nation’s finances in order at a time when Latin America’s largest economy heads toward the deepest recession in a century. Brazil reported its biggest budget deficit on record last year, underscoring the country’s challenges to cope with falling tax revenue as the commodity boom ends.

The real rose 1.8 percent to 3.9992 per dollar, trimming its monthly slide to 1 percent. It also joined gains in emerging-market currencies as the Bank of Japan’s unexpected monetary stimulus boosted confidence that central banks remain vigilant of slowing economic growth.

The decision in Japan could result in more flows to developing economies, especially to those where interest rates are high such as Brazil, said Cleber Alessie, a currency trader at H.Commcor DTVM. The central bank this month kept the Selic rate at 14.25 percent, the highest level since 2006.

"Brazilian assets are cheap at this moment,” Alessie said from Sao Paulo “The real could reflect that and trade stronger,” he said.

Swap rates on contracts due January 2017 advanced 0.07 percentage point to 14.52 percent. They were still down 0.33 percentage point this week.

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