Brazil Real, Stocks Gain as Global Optimism Outweighs Politics

Brazil’s real and stocks advanced as speculation the Federal Reserve will slowly increase interest rates lifted emerging-market assets, overshadowing concern over a worsening of the South American nation’s political outlook.

The real rose 0.2 percent to 3.4740 per dollar Wednesday. The Ibovespa added 0.5 percent to 48,914.74 as miner Vale SA and steelmakers including Gerdau SA rallied amid speculation that China is planning to increase its stockpiles of base metals.

Brazilian assets joined gains in global equities as the number of Fed policy makers who see just one interest-rate increase this year rose to six from one in the previous forecasting round in March, bolstering appetite for riskier investments. The Ibovespa and the real had earlier pared their advance after Valor reported that a former chief at a Petroleo Brasileiro SA’s subsidiary signed a plea bargain related to a corruption probe and cited Acting President Michel Temer’s alleged involvement in his testimony. Temer’s press office didn’t immediately respond to a phone call and an e-mail seeking comment.

“There is no indication that Fed rate hikes will happen sooner than expected -- which is good for emerging markets," said Jefferson Rugik, foreign-exchange manager at Correparti Corretora de Cambio in Curitiba, Brazil. "That counters the domestic political woes regarding Temer being mentioned in corruption allegations. That’s something the market doesn’t want to hear now."

Brazilian swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.03 percent to 12.72 percent.

--With assistance from Vinícius Andrade and Denyse Godoy To contact the reporters on this story: Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net, Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net, Ney Hayashi in Sao Paulo at ncruz4@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Rita Nazareth