Brazil Real Rises as Commodity Rally Offsets Central Bank Move

  • Central bank acts first time this week to curb real's rally
  • Currency jumped to the highest level since July 2015

Brazil’s real climbed to the highest level since July as commodities prices rallied, overshadowing plans by the central bank to sell reverse-swap contracts that tend to weaken the currency.

The real gained 1.5 percent to 3.4358 per dollar on Friday, extending this month’s gain to 4.6 percent, as the U.S. currency weakened globally. A Bloomberg index of raw materials rose 0.8 percent to the highest since November.

The currency rebounded from an earlier drop, even as the monetary authority sold $1.63 billion in reverse-swap contracts, which have the same effect as buying the greenback in the futures market. Policy makers revived the program last month after the real surged, dimming the outlook for exports. The central bank had held off on selling the reverse swaps in the past four days.

"In Brazil, it’s still unclear as to whether the central bank will lean against a move to 3.40 per dollar at this point," said Sacha Tihanyi, a senior emerging-market strategist at TD Securities in New York.

Brazilian assets have soared this year on prospects that a new government may take over and be able to restore growth and curb a record budget deficit. Brazil’s currency, stocks and corporate bonds are all among the world’s best performers.

Swap rates on the contract maturing in January 2017, a gauge of expectations for interest rates, fell 0.04 percentage point to 13.60 percent.

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