Brazil’s real dropped on bets remarks by Federal Reserve Chairwoman Janet Yellen underpins speculation that the U.S. central bank may phase out stimulus measures that have boosted emerging-economy assets.
The real fell 0.5 percent to trade at 2.2799 per dollar as of 4:16 pm Sao Paulo time, adding its weekly decline to 0.9 percent. Swap rates on the contracts that mature in January 2016 declined 0.06 percentage points or six basis points, to 11.26 percent.
“Investors saw it as a sign that the Fed is on the brink of raising rates,” Reginaldo Galhardo, a Sao Paulo-based foreign exchange manager at Treviso Corretora de Cambio, told Bloomberg News.
Yellen said that the U.S. economy has registered significant progress in rebounding from the biggest and most persistent loss of jobs since the Great Depression. She made the remarks on Friday at the Federal Reserve Bank of Kansas City’s annual economics convention in Jackson Hole, Wyoming.
Brazil’s current-account deficit in July expanded more than economists had forecasted as the central bank tries to prop up the real. The current account shortfall rose to $6 billion last month compared with $3.3 billion in June, reported the central bank.
The real has gained 3.6 percent in 2014, partly on bets that President Dilma Rousseff will lose in the elections and the new government will boost economic growth. Most traders expect the currency to drop 4.2 percent this year.
The central bank has auctioned swaps worth $197.2 million since last year under an intervention program that seeks to prop the real and curb import prices. It has also rolled over contracts worth $493.4 million. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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