Brazil Real Falls Before Key Settlement Date, Impeachment Ballot

  • Traders trying to control central bank monthly currency rate
  • Lawmakers betting on Rousseff’s permanent ouster this week

Saravelos: Brazil's Real Rallies on Fed Dis-Belief

Brazil’s currency declined amid speculation banks were seeking to weaken it before the central bank determines a key rate used in settling some financial contracts, overshadowing optimism that a new government will pull the country out of recession as President Dilma Rousseff’s impeachment trial heads into its final stages.

The real weakened 0.3 percent to 3.2401 per dollar Tuesday in Sao Paulo, trimming the monthly advance to 0.2 percent although the currency is still up 22 percent this year, the world’s best performance. An index of 20 emerging market currencies slid 0.4 percent.

The central bank currency rate, known as Ptax, is calculated every business day based on data collected from banks, but the last day of the month becomes a reference for the settlement of many derivative contracts in the local market. Some banks might have bet the real would be trading at a weaker level this month, so it’s in their interest to try to push down the local currency, according Italo Abucater, the head of foreign-exchange trading at Icap Brasil.

"There are all these political advancements with the impeachment process unfolding while traders fight to control the Ptax," Abucater said.

Investors have piled into the real and Brazilian stocks this year on speculation that a new government would improve the country’s finances and restore confidence in its ailing economy. The trial, on charges that Rousseff illegally financed government spending, is scheduled to finish as early as Tuesday. At least 54 senators need to vote in favor of impeaching Rousseff to permanently oust her and ban her from public office for eight years. Acting President Michel Temer’s allies are confident they can get 60.

Supreme Court Chief Justice Ricardo Lewandowski said the final vote will probably happen as early as possible on Wednesday. On Tuesday, there are 65 speakers signed up to speak.

Brazilian swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, declined 0.02 percentage point to 12.77 percent.

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