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BRL Falls After Fed Rate Outlook

The real fell to a seven-month low a day after the U.S. Federal Reserve supported the dollar by raising its forecast for interest rates as investors awaited the results of a new Brazilian presidential poll.

The real declined 0.6 percent to 2.3731 per dollar at 9:32 a.m. in Sao Paulo, the weakest level on a closing basis since Feb. 19. Swap rates, a gauge of expectations for changes in borrowing costs, rose eight basis points, or 0.08 percentage point, to 11.61 percent on the contract due in January 2016.

Most emerging-market currencies retreated yesterday as Fed officials raised their median estimate for the target lending rate at the end of 2015 to 1.375 percent from June’s estimate of 1.125 percent. In Brazil, Datafolha may publish a presidential poll as soon as today.

“The increase in the Fed rate forecast was unexpected, and that brought some tension to investors,” Camila Abdelmalack, an economist at CM Capital Markets in Sao Paulo, said in a telephone interview. “The real, along with some other currencies, is declining as a reflection of that.”

While the U.S. central bank raised its outlook for borrowing costs, it stuck with a pledge to hold interest rates near zero for a “considerable time” after the end of a program of asset purchases that has supported emerging-market assets, probably next month.

via Bloomberg [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
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
Alfonso Esparza

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