The Brazil’s real jumped from its lowest level in nine years after the market estimated the currency’s decline on Monday after President Dilma Rousseff got re-elected was excessive. Rousseff was also thought to be considering overhauling her entire economic advisory team.
The real rose 1.2 percent to trade at 2.4923 per dollar as of 9:55 a.m. Sao Paulo time, the most of all currencies monitored by Bloomberg LP. The real had touched 2.5211 against the dollar at the close of markets yesterday, its lowest level since April 2005. Swap rates, which track expectations of swings in interest rates, plunged five basis points to 11.78 percent for the contract that matures in January 2016.
The currency had plunged 1.9 percent on Monday after Rousseff won her re-election bid.
“Given the overbought conditions, we see room for some downside correction in the short run,” Ipek Ozkardeskaya, a Geneva-based currency strategist at Swissquote Bank SA, told Bloomberg News. Demand for real-denominated holdings depends “on how Rousseff’s new team manages to shift toward more economic liberalization. A political disappointment will clearly place the 2.60/2.75 zone on the radar.”
Meanwhile, the Indonesia’s rupiah posted heavy losses on speculation that the country won’t cut fuel subsidies soon. The concern was triggered by failure by the cabinet to discuss the issue in its first meeting on Oct. 27.
The currency dropped 0.5 percent, its steepest decline since Sept 29, to 12,170 per dollar at the close of trade. The rupiah has declined 1.5 percent over five consecutive days, the most since June 4. The yield on the nation’s 8.375 percent bonds that mature in March 2024 surged four basis points to 8.07 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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