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Bloomberg
Brazil’s real led losses among its most-traded peers as the central bank stepped in to weaken the currency, extending a program announced this month after three years of trying to support the real.
The real fell 0.3 percent to 3.6388 per dollar on Tuesday in Sao Paulo, the only drop among 16 major currencies, after earlier falling as much as 1.4 percent. It trimmed losses after news that Brazil’s biggest political party formally left the governing coalition bolstered speculation that support for President Dilma Rousseff’s ouster will increase. Federal Reserve Chair Janet Yellen’s signal that the U.S. central bank remains wary of raising rates also lifted the real from Tuesday’s lows.
Brazil’s real has climbed 9 percent this year, the most in the world, as the drive to impeach Rousseff gains momentum and speculation grows that a change in government could be the best hope to ending the worst recession in a century.
The central bank auctioned 19,520 foreign-exchange reverse-swap contracts Tuesday, equivalent to buying dollars in the futures market, while refraining from calling a swap rollover auction for the second straight session.
“The new auction announced by the central bank last night is intended to contain the appreciation of the real,†said Italo Abucater, the head of currency trading at ICAP Brasil Ctvm in Sao Paulo. “Political developments in Brazil should keep the currency volatile.”
One-week implied volatility on the real remains the highest among major currencies, at 21.65 percent.