Brazil's Real, Stocks Rally as Impeachment Bets Gain Momentum

  • Assets were also supported by an advance in commodity prices
  • Estado newspaper says support for impeachment has increased

Brazil’s stocks and the real led world gains as an advance in raw material prices and growing speculation that President Dilma Rousseff is getting closer to being ousted buoyed the country’s assets.

Brazil’s currency, the most volatile in emerging markets, rose 2.7 percent to 3.5904 per dollar on Friday. A gauge of developing-nation currencies advanced as commodity prices increased the most in two months. The Ibovespa climbed 5.9 percent in dollar terms, the most among more than 90 gauges tracked by Bloomberg.

Traders pushed up the value of Brazil’s assets Friday after O Estado de S. Paulo reported more lawmakers are in favor of impeachment and Brazil’s prosecutor general recommended former President Luiz Inacio Lula da Silva be prevented from joining Rousseff’s cabinet, saying the appointment may be designed to interfere with corruption investigations. The real and local stocks led global gains in the first quarter on wagers that a new government would boost confidence and get the country out of its worst recession in more than a century.

"Besides the improvement in commodities and emerging-market currencies, news that the government is losing ground in its impeachment battle are driving local assets such as the real, stocks and swap rates," said Leonardo Monoli, a partner at Jive Asset Gestao de Recursos in Sao Paulo.

Brazil, just as many other developing nations, is heavily dependent on raw materials for jobs and trade. Commodities account for more than half of Brazil’s exports. Steelmaker Gerdau SA was the best performer among a group of exporters as a Standard & Poor’s index of commodities climbed the most since February. State-controlled oil producer Petroleo Brasileiro SA followed crude’s advance.

Gerdau added 11.3 percent, and Petrobras climbed 7.3 percent. Itau advanced 6.3 percent and Bradesco gained 5 percent. The two banks contributed the most to the index’s gain Friday.

"Investors are pretty optimistic," Raphael Figueredo, an analyst at brokerage Clear Corretora, said from Sao Paulo. "Prospects for Brazilian companies that sell abroad and domestically seem encouraging."

Swap rates on the contract maturing in January 2017, a gauge of expectations for Brazil’s interest rates, fell 0.08 percentage point to to 13.8 percent.

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