Brazil Real Rises With Commodities as Funds Repatriation Looms

  • Currency is the world’s top performer this year, gaining 24%
  • Repatriation rule expected to bring surge in inflows to Brazil

The real advanced as oil prices rebounded and traders anticipated a jump in dollars coming into Brazil as the deadline approached for a program that encourages citizens to repatriate undeclared overseas funds.

The real gained 0.5 percent to 3.1877 per dollar Tuesday in Sao Paulo. A proposal that would have extended the Oct. 31 deadline for repatriating funds to pay late taxes without criminal charges was removed from the Lower House agenda, according to Valor Economico. 

The real has advanced 24 percent this year, the most in the world, on bets that President Michel Temer will be able to win back investor confidence and restore economic growth, and the repatriation bill is expected to help trim a budget deficit that cost Brazil its investment grade in 2015. The real also got a boost Tuesday from a rally in raw materials, which make up more than half of Brazil’s exports, and speculation that a pick-up in the global inflation outlook won’t tempt the Federal Reserve to quicken the pace of monetary tightening.

"Brazilians with money abroad are racing against the clock to bring in their cash before the end of this month, so there is expectation of a large inflow in the coming days," Camila Abdelmalack, the chief economist at CM Capital Markets in Sao Paulo who expects the repatriation to reach some 50 billion reais, said. "The real also gains amid a better global environment for higher yielding currencies."

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.02 percentage point to 11.99 percent.

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