Brazil’s Real Drops Ahead of Fed’s Policy Statement

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Brazil’s Real Drops Ahead of Fed’s Policy StatementThe Brazil’s real dropped ahead of the scheduled release of U.S. Federal Reserve’s minutes after an opinion poll showed that backing for President Dilma Rousseff’s re-election bid fell.

The real plunged 0.7 percent to 2.3478 per dollar as of 23:54 p.m. Sao Paulo time, the third biggest decline among developed-market currencies after the Australian and New Zealand dollars. Swap rates, which measure forecasts for adjustments in interest rates, rose 0.05 percentage point, or five basis points, to 11.55 percent for the contract that matures in January 2016.

“As the Fed meeting comes to an end, investors rush to position themselves,” Reginaldo Siaca, a Sao Paulo-based foreign-exchange manager at Advanced Corretora de Cambio in Sao Paulo, told Bloomberg News.

The U.S. Federal Open Market Committee is expected to publish its policy statement and announce fresh economic forecasts at 2 p.m. on Wednesday, with Fed Chair Janet Yellen holding a press briefing 30 minutes later. Economists predict that the U.S. central bank will cut monthly bond acquisition program by $10 billion to $15 billion, ensuring it remains on track to phase it out in October.

An Ibope opinion poll released on Tuesday indicated that a Rousseff and her main rival Marina Silva are virtually tied in an election runoff, while support for third-placed aspirant Aecio Neves surged. Rousseff is expected to win 36 percent of the total votes cast in the first round, with Silva garnering 30 percent and Neves 19 percent.

A previous Ibope poll had showed Rousseff had 39 percent support, compared with Silva’s 31 percent and 15 percent for Neves.

In order to prop up the real, the central bank placed $198.2 million worth of currency swaps for sale and rolled over $296.4 million worth of contracts. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at yashu@forexminute.com