BRL Rises After Central Bank Sells USD

Brazil’s real climbed for a fourth day in the longest stretch of advances in a month as the central bank extended its intervention program supporting the currency.

The real rose 0.4 percent to 2.2374 per U.S. dollar at 9:53 a.m. in Sao Paulo, the strongest level on a closing basis since May 29. Swap rates on contracts maturing in January 2017 increased six basis points, or 0.06 percentage point, to 11.58 percent after falling last week to seven-month low.

The sale of foreign-exchange swaps to bolster the real and limit import price increases has helped the currency climb 5.4 percent this year, the biggest gain among 24 emerging-market countries tracked by Bloomberg. Central bank President Alexandre Tombini said May 22 that there has been “a certain drop in demand” for swaps, a comment that traders interpreted as a sign that he may cut back the program.

“The measure is positive for the currency and shows the central bank intends to keep supporting it,” Silvio Campos Neto, an economist at Tendencias Consultoria Integrada in Sao Paulo, said in a telephone interview. “Now the market is waiting for details regarding the continuation of the program.”

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza