Brazil’s Currency Gains With Stocks as Political Tensions Ease

  • Recordings by former minister may not hurt Temer in scandal
  • Economists cut growth forecast in weekly central bank survey

Brazil’s real and stocks advanced as political tensions eased and a rise in raw-material prices spurred a jump in currencies of commodity-producing nations.

The currency broke a four-day losing streak, climbing 0.8 percent to 3.3876 per dollar as the Ibovespa equity benchmark added 2.1 percent for the biggest gain in three weeks. The Bloomberg Commodities Index rose 1.2 percent. Materials such as iron ore, soybeans and oil account for more than half of Brazil’s exports.

The Ibovespa and real are among the world’s best performers this year on speculation President Michel Temer, who took office after Dilma Rousseff was impeached, will end the worst recession in a century. The currency sold off last week amid concern Temer could be implicated in a corruption scandal after former Culture Minister Marcelo Calero said he recorded conversations in which the president pressured him to assist a fellow minister to resolve a stalled real estate project. In a Sunday night TV interview, Calero said the recording was part of normal protocol, leading to speculation the content of the tape won’t directly implicate Temer.

"There’s a better environment for higher-yielding assets and on the internal front, the interview of former Minister Calero brought more information,” said Mauricio Oreng, a senior strategist at Rabobank in Sao Paulo. “That slightly diminishes the perception of political and governance risks."

The political scandal doesn’t increase the odds of Temer not finishing his term, political risk consultancy Eurasia said Friday.

Economists cut their growth forecasts for the economy in a weekly central bank survey released Monday. They see gross domestic product falling 3.49 percent this year, more than the previous estimate of a 3.4 percent contraction. Brazil economists also lowered their 2017 growth forecast below 1 percent for the first time since June.

"The current momentum is challenging even without the political crisis, as many players are revising economic forecasts," said Jayro Rezende, treasurer at Banco da China in Sao Paulo.

Vale SA climbed 6.3 percent as iron ore prices rose for the sixth consecutive day. Logistics company Rumo Logistica Operadora Multimodal SA rose 6.8 percent.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, dropped 0.04 percentage point to 12.12 percent.

— With assistance by Anna Edgerton, and Aline Oyamada

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