The Brazil’s real rose to its highest level in one week after a survey indicated that presidential candidate Marina Silva, who has promised to tame inflation and give the central bank more independence, will defeat President Dilma Rousseff in the election runoff.
The currency rose just under 0.1 percent to trade at 2.2609 per U.S. dollar as of 12:41 p.m., Sao Paulo time, the highest level since August 19. Swap rates, which measures expected swings in interest rates, rose 0.03 percentage point or three basis points, to 11.44 percent on contract that matures in January 2018.
“Silva would support inflation control, the floating exchange rate and cut government expending,” Luciano Rostagno, a Sao Paulo-based chief strategist at Banco Mizuho do Brazil told Bloomberg News. “That is positive.”
President Rousseff is fast becoming unpopular after supervising the weakest economic expansion in two decades. Rousseff is expected to attain 36 percent in a runoff vote against 45 percent for Silva, who was once Brazil’s environment minister, an Ibope poll conducted on Aug 23-25 showed. The survey involved 2,506 respondents. In the first round, Rousseff will garner 34 percent of the votes, compared with 29 percent for Silva, while Senator Aecio Neves will net 19 percent of the total votes cast.
In order to boost the real and curb import-price increases, Brazil placed $197.5 million worth of FX swaps for sale and rolled over contracts valued at $494.4 million.
Silva recently became the Brazilian Socialist Party candidate after the death of Eduardo Campos in a plane crash on Aug. 13. She has promised to reduce inflation to 3 percent by the end of 2018 from July’s reading of 6.5 percent, give the central bank more autonomy and review the fiscal policies that resulted in a credit rating downgrade.To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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