Brazil’s Real Recovers on Central Bank Support as Ibovespa Gains

(Bloomberg) -- Brazil’s real pared the worst of its losses after the central bank stepped in to support the currency, while chemicals company Braskem SA led a rally on the Ibovespa.

The real recovered from a drop of as much as 0.8 percent Friday to trade slightly weaker after policy makers rolled over $750 million of foreign-exchange swaps initially set to mature in January, in their first action in the foreign-exchange market in more than a week. Braskem added 12 percent, the most in a year, while iron-ore producer Vale SA was the biggest contributor to the Ibovespa’s advance.

Friday’s recovery came after both the real and benchmark equity gauge posted the world’s worst declines yesterday. Brazil’s lower house set off a firestorm of criticism earlier this week by including under-the-radar proposals into an anti-corruption bill that critics say would be setback in efforts to crack down on graft. A plea bargain agreement involving builder Odebrecht also raises the specter that a sweeping corruption scandal known as Carwash will spread as company officials accused of illegally routing money to politicians will identify who took the bribes. All that could imperil efforts to push through measures designed to put an end to the country’s worst recession in a century.

"The increased political tensions, the corruption bill mess, concerns that more politicians could be engulfed by the Carwash probe and weaker economic data all weigh on Brazilian assets," said Georgette Boele, a currency and commodity strategist at ABN Amro NV in Amsterdam. She was one of the real’s top forecasters in the past quarter, according to Bloomberg rankings.

The real slipped 0.4 percent to 3.4769 per dollar on Friday and was down 1.8 percent this week. The currency has declined in five of the last six weeks.

The Ibovespa gained 1.4 percent to 60,316.13. Braskem SA posted the biggest advance on the gauge after the company said it is in advanced talks with authorities to sign a leniency deal related to the Carwash corruption probe.

Stocks slid earlier after a bigger-than-forecast drop in industrial output raised concern Brazil will struggle to recover from its worst recession in a century. Frequent flier services company Smiles SA tumbled 4.1 percent.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, fell 0.02 percentage point to 12.24 percent.