Brazil Real Gains as Goldfajn’s Hearing Reassures Investorsby
Central bank nominee says he’s committed to floating real
Prosecutor-general said to ask for the arrest of PMDB members
Brazil’s real advanced after the nominee to lead the central bank, Ilan Goldfajn, revived hopes that the government’s newly named economic team can restore confidence in the economy.
Goldfajn, previously the chief economist at Itau Unibanco Holding SA, said at his confirmation hearing Tuesday that he will be committed to a floating foreign-exchange rate and slowing inflation to the bank’s 4.5 percent target. He was nominated to the post by Acting President Michel Temer, who took over last month after Dilma Rousseff was forced to step down while she faces an impeachment trial.
"Goldfajn brings a lot of credibility to this government, and investors like to see him committing to some pillars that are quite important," said Reginaldo Galhardo, a foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo. "When the political scenario is so unstable, the economic front is something seen as positive within this government."
The currency reversed earlier losses and advanced 1.4 percent to 3.4423 per dollar on Tuesday. It had declined as much as 0.7 percent after a newspaper reported that Prosecutor-General Rodrigo Janot is seeking to arrest key allies of Temer as part of a sweeping corruption investigation.
While the real tumbled last month on concern that the new administration may struggle to revive growth, it’s still the best-performing major currency this year on speculation the new administration will be able to bolster the economy and shore up the budget. To do that, Temer needs to find support in Brazil’s fractured Congress for measures to reduce spending and raise revenue. The increase in political tension fans concern that he may not be able to gather political support necessary to pass such measures.
Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.05 percentage point to 12.56 percent.