Brazil Real rises as China support offsets political tensions

Rio De Janeiro /Bloomberg

Brazil’s real advanced as China’s efforts to boost its economy offset increasing tension between President Dilma Rousseff and her party as a corruption investigation gets closer to her administration.
The currency gained 0.2 percent to 3.9907 per U.S. dollar in Sao Paulo. It was headed to its first monthly advance since November. One-week implied volatility for the real climbed 0.545 percentage point to 20.555 percent, the highest level since January.
The currency strengthened after China, Brazil’s biggest export market, stepped up its efforts to mitigate an economic slowdown by reducing the amount of cash its banks must hold in reserve. China is the biggest market for commodities exports, and raw materials gained on the news of further stimulus, boosting 20 emerging markets currencies.
“We can see support for the real from the scenario abroad,” said Cleber Alessie, a currency trader at H.Commcor DTVM Still, the sweeping corruption investigation in Brazil known as Carwash “has the potential to pressure the currency.”
The probe is getting closer to Rousseff after the strategist behind her electoral victories in 2010 and 2014 was arrested last week on accusations of using foreign bank accounts to allegedly receive illicit funds from offshore companies controlled by one of Brazil’s largest builders.
Rousseff decided to skip a major event that celebrated the 36th anniversary of her Workers’ Party this weekend in Rio de Janeiro.

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