Brazilian Real Rises With Emerging Markets as Commodities Rally

  • China steps up efforts to help currency and its economy
  • Global optimism offsets outlook for worsening crisis at home

The real gained along with emerging-market currencies as commodities advanced, offsetting concern that Brazil’s economy continues to worsen while policy makers struggle to get inflation and a budget deficit under control.

The real rose 0.5 percent to 3.9843 per dollar at 9:51 a.m. in Sao Paulo. A gauge of 20 emerging-market currencies gained 0.3 percent as raw materials from crude to copper advanced. Commodities account for about half of Brazil’s exports.

The real climbed as China, Brazil’s top trading partner, stepped up efforts to restore stability to its own currency and economy. China’s balance of payments is good and capital outflows are normal, with the exchange rate basically stable against a basket of other currencies, People’s Bank of China Governor Zhou Xiaochuan said in an interview published in Caixin magazine over the weekend.

"Hopes that the PBoC will step up efforts seem to lend support to the real," said Ipek Ozkardeskaya, an analyst at London Capital Group. "The fake optimism in the market on these hopes that major central banks will add more stimulus to prevent the world economy from plunging into a deeper melancholy help to give some color to risky assets such as the real."

The outlook for Brazil’s economy worsened as analysts in a central bank survey published Monday said the nation is headed for a deeper recession. Economists in the survey expect gross domestic product to shrink 3.33 percent in 2016 and inflation to end the year at 7.61 percent.

Swap rates on the contract maturing in January 2017, a gauge of expectations for Brazil’s interest rates, was unchanged at 14.42 percent.

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