Real advances as impeachment drive overcomes intervention

Bloomberg

Brazil’s real rose as the Senate gears up for a vote that would force President Dilma Rousseff out and into an impeachment trial she appears unlikely to survive, even as the central bank intervened to weaken the currency.
The real strengthened 0.4% to 3.4639 per dollar in Sao Paulo as the monetary authority announced it would offer 20,000 reverse swaps, a move that’s equivalent to buying $1 billion in the futures market. In March, central bank policy makers re-introduced a program created in 2005 that aims to limit the real’s appreciation from curtailing exports. Policy makers have since sold $38.4 billion of reverse swap contracts, the equivalent of buying dollars in the futures market.
This hasn’t stopped the real from being the best-performing currency in the world this year amid wagers that Rousseff’s impeachment will usher in a new administration better positioned to pull the country out of its worst recession in a century.
The Senate debate is scheduled to end with a vote, with surveys by the country’s major newspapers showing the opposition has about 50 votes, more than the simple majority in the 81-seat chamber that’s necessary to remove her from office temporarily.
One-month implied volatility in the real rose 0.1% point to 18.4 percent, the second-highest among major currencies. The cost of hedging Brazil’s sovereign debt against losses using five-year credit-default swaps dropped 2.5 basis points to 334.7 basis points.