Brazilian Real Joins Emerging-Market Advance Amid Fed Signals

  • U.S. central bank stresses gradual path for tighter policy
  • Low U.S. rates seen keeping allure of developing nations

Brazil’s real joined gains in emerging-market currencies after the Federal Reserve underscored a gradual pace toward tighter monetary policy, boosting the appeal of riskier assets.

The real advanced 0.4 percent to 3.2619 per dollar on Wednesday, after falling as much as 0.5 percent before the Fed decision to kept interest rates unchanged. A gauge of emerging-markets currencies compiled by Bloomberg was up 0.2 percent, erasing losses.

"Markets were overly hedged for the Fed and it wasn’t as hawkish as it could be," said Cleber Alessie, a currency trader at H.Commcor DTVM in Sao Paulo.

Traders had bid up the dollar over the past month as data on jobs, retail sales and industrial production buoyed the outlook for growth, boosting speculation a strengthening U.S. economy will spur officials to raise rates for the first time this year. Still, Brazil’s real was able to lead gains among major currencies this year amid optimism that the government of Acting President Michel Temer can trim the country’s budget deficit and restore confidence in its ailing economy.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest rates, fell 0.01 percentage point to 12.84 percent.

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