Ibovespa Leads World Gains as Real Rises Amid Impeachment Wagers

  • Brazilian lawmakers push Rousseff closer to being ousted
  • Currency advances even after $8 billion record intervention

Brazilian stocks led world gains and the real advanced amid speculation that President Dilma Rousseff is closer to impeachment.

The Ibovespa climbed to the highest level since July after a lower house committee voted in favor of Rousseff’s impeachment by a wider margin than originally forecast, setting the stage for a showdown when the full house convenes as early as Sunday. Meanwhile, the real rose for a third day even after a record $8 billion intervention by Brazil’s central bank to curb the currency’s rally.

QuickTake Brazil's Ups and Downs

“Investors are very optimistic with the prospects for a change in government,” said Paulo Figueiredo, an economist at asset management firm FN Capital in Petropolis, Brazil. "The result of the vote was much better than the opposition expected. Politics continue to be the main driver for Brazilian assets, and we should expect volatility as the impeachment is a complicated process."

Traders have piled into Brazilian shares, bonds and the real this year on speculation that a change in government would pave the way for reforms that could pull Latin America’s largest economy from its deepest recession in a century. The advance sent stocks close to the most expensive level in 20 years relative to their Latin American peers, according to data compiled by Bloomberg. The real climbed 10 percent against the dollar in the first quarter, following last year’s tumble, and was the world’s most volatile currency over the last three months.

The Ibovespa jumped 3.7 percent to 52,001.86, led by lenders Itau Unibanco Holding SA and Banco Bradesco SA. Vale SA, the largest iron-ore producer, followed a rally in commodities. The real rose 0.1 percent to 3.4889 per dollar.

The central bank sold 160,000 foreign-exchange reverse swaps in five different auctions Tuesday, moves that are equivalent to buying dollars in the futures market. It was the biggest sale on a single day since the contracts, which tend to weaken the real, were sold for the first time in 2005. The program was re-introduced last month after three years of efforts to support the currency.

"The intensification in the central bank intervention is strong," Pablo Spyer, operational director at Mirae Asset Wealth Management, said from Sao Paulo. "The impression is that the central bank just wants to reduce volatility in the currency, which is very high."

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