Feb. 1 (Bloomberg) -- Brazil’s real rallied to the strongest level in almost three months as signs of increased manufacturing output worldwide spurred optimism about global growth and fueled demand for higher-yielding assets.
The real advanced 0.7 percent to 1.7343 per U.S. dollar, and earlier touched 1.7295, the strongest since Nov. 4. Yields on the interest-rate futures contract due in January 2014, the most actively traded today in Sao Paulo, fell five basis points, or 0.05 percentage point, to 9.93 percent.
Manufacturing in China, Brazil’s largest trading partner, rose last month as the world’s second-biggest economy withstood weaker exports driven by the European debt crisis. A gauge of manufacturing in the euro area beat estimates in January while a report today showed U.S. factory output grew at the fastest pace in seven months. The data fueled bets of increased demand for Brazilian exports such as iron ore and sugar, said Felipe Brandao, emerging-markets strategist at Icap do Brasil CTVM.
“The market is being influenced by the positive impact of international equities and a more optimistic climate because of this data in Europe and China,” Brandao said in a telephone interview from Sao Paulo. “This data is driving stocks this morning and benefiting risk assets.”
China’s official purchasing managers’ index increased to 50.5 in January from 50.3 in December, exceeding the median estimate in a Bloomberg News survey for a reading below the 50 level that divides expansion from contraction.
In the U.S., the Institute for Supply Management’s manufacturing index climbed to 54.1 from 53.1 in December, the Tempe, Arizona-based group’s report showed today. The median forecast of economists surveyed by Bloomberg was 54.5. Orders and export demand picked up last month.
Petroleo Brasileiro SA, Brazil’s state-controlled oil producer, sold $7 billion in bonds in overseas markets today. Fitch Ratings had said yesterday that the company would issue $6 billion of debt. Soaring international bond issuance by Brazilian companies helped spark the 6.9 percent gain in the real in January, the biggest monthly advance since October.
Trading in Brazil’s interest-rate futures and currency derivatives markets was stopped today between 1 p.m. and 2 p.m. local time because of technical issues, said an official with Sao Paulo-based securities exchange BM&FBovespa SA.
Consumer prices, as measured by the IPC-S index, rose 0.81 percent in January, compared with 0.93 percent in the previous period, the Rio de Janeiro-based Getulio Vargas Foundation said today. This compares with the 0.87 percent median estimate of 23 economists surveyed by Bloomberg.
Signs of economic resilience in China also pushed up yields on interest-rate futures contracts earlier in the day as traders bet stronger demand for commodities could fuel inflation, Brandao said.
“Any little sign of activity in China pushes up commodities and this can be bad for the rates market,” he said.
--Editors: Glenn Kalinoski, Marie-France Han
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