Brazil Real Joins a Slide in Latin America Amid Caution With Fed

(Bloomberg) -- Brazil’s real joined a slide in Latin American currencies amid investor caution ahead of a key address by Federal Reserve Chair Janet Yellen.

The currency slid 0.3 percent to 3.2091 per dollar at 12:38 p.m. in Sao Paulo. An index of 20 emerging-market currencies advanced 0.1 percent, while Latin American currencies weakened 0.4 percent against the dollar, led by the Colombian peso.

Investors who have made the real the world’s best performing currency this year as they take advantage of the country’s higher interest rates are waiting for Yellen’s remarks Aug. 26 at the annual symposium, where the Fed chair may give insight on whether the U.S. economy is growing fast enough for rates to rise this year. Such a move would boost the dollar and make higher-yielding currencies such as the real less attractive. Data in the U.S. today showed new home sales unexpectedly rose to a nine-month high last month.

"It’s all macro to me this week," said Sacha Tihanyi, a senior emerging-market strategist at TD Securities in New York.

The real advanced earlier as Acting President Michel Temer delayed pay increases for public workers, bolstering confidence that he’ll be able to shore up the budget. Investors have bet that a new government will improve the country’s finances and end the deepest recession in a century after Brazil lost its investment-grade credit rating last year.

Brazil’s policy makers offered 10,000 of reverse foreign-exchange swaps, equivalent to buying $500 million in the futures markets, for the third straight session. The central bank had been offering $750 million of the contracts daily since Aug. 11, after the real reached a one-year high. The bank scaled back its intervention after the real posted three straight days of declines last week, its longest losing streak in six weeks.

Brazilian swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, dropped 0.04 percentage point to 12.67 percent.

To contact the reporters on this story: Paula Sambo in Sao Paulo at psambo@bloomberg.net, Aline Oyamada in Sao Paulo at aoyamada3@bloomberg.net. To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net, Sebastian Boyd