Brazil Real Extends Five-Day Decline as Central Bank Intervenes

(Bloomberg) -- Brazil’s real dropped as commodities traded lower and the central bank intervened for a fifth consecutive day to weaken the currency.

The real declined 1.1 percent to 3.3675 per dollar Thursday as the monetary authority placed all 10,000 reverse swaps it offered, equivalent to buying $500 million in the futures market. The currency has declined 4.6 percent this month, the most in the world.

Policy makers revived the intervention program in March after the real surged, dimming the outlook for exports, and have since sold $45.3 billion of the contracts. The central bank has held auctions every day this week. The currency earlier rose as traders pared bets on higher U.S. interest rates after Federal Reserve minutes showed less confidence in the economy.

"As long as the central bank keeps selling swaps, there will always be a correction in the real, that is if there are no flows," Hideaki Iha, a trader at Fair Corretora, said from Sao Paulo. "The central bank overshadows the global environment."

Still, Brazil’s real most successful forecaster in the first half of the year says the currency is set to benefit from increased demand for emerging-market assets following the U.K.’s vote to leave the European Union.

After the so-called Brexit vote, “we expect emerging markets to win favor, and this would allow the real to continue appreciating," said Antonio Cesarano, the head of market strategy at MPS Capital Services in Siena, Italy. "Brazil also has this potential breath of fresh air due to the change in leadership after the impeachment.”

Brazilian assets have soared this year on prospects that a new government may be able to restore growth and curb a record budget deficit. Brazil’s currency, stocks and corporate bonds are all among the world’s best performers.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest rates, dropped 0.02 percent to 12.78 percent.

--With assistance from Filipe Pacheco Chiara Vasarri and Rafael Mendes To contact the reporters on this story: Paula Sambo in Sao Paulo at psambo@bloomberg.net, Vinícius Andrade in São Paulo at vandrade3@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Sebastian Boyd