Bloomberg News

Brazil Real Gains as U.S. Growth Prospects Erase Earlier Losses

March 29, 2012

Brazil’s real gained, erasing earlier losses in the final two hours of local trading before the publication of data tomorrow that is forecast to show growth in U.S. consumer confidence and spending.

The real had touched the lowest level in almost three months as Standard & Poor’s warning that Greece may have to restructure debt again intensified concerns about the global economy and deepened this month’s losses caused by government measures to curb dollar inflows.

The real advanced 0.2 percent to 1.8214 per U.S. dollar today in Sao Paulo, after earlier touching 1.8379, the weakest level since Jan. 9. Yields on the interest-rate futures contract due in January 2013 increased one basis point, or 0.01 percentage point, to 8.92 percent.

“U.S. stocks brought up the real by showing some resistance in the waves of coming-and-going concerns over world growth,” said Alfredo Barbutti, an economist at Liquidez Dtvm Ltda. in Sao Paulo.

U.S. benchmark equity indexes recovered from their lows of the session, with the Dow reversing a 94-point loss, amid speculation a three-day slump was overdone given improving economic data.

A Greek debt restructuring may involve bailout partners such as the International Monetary Fund, Moritz Kraemer, head of sovereign ratings at S&P, said at an event in London.

Growth Forecast

Brazil’s central bank said today it expects gross domestic product to expand 3.5 percent in 2012, following a 2.7 percent expansion last year and 7.5 percent in 2010. Brazil will miss its inflation target next year even if policy makers resume interest rate increases after cutting borrowing costs to a near record low, the bank said in its quarterly inflation report.

Policy makers said inflation will slow to within the 4.5 percent target by year’s end, and then quicken to 5.3 percent in 2013, should the central bank fulfill economists’ forecast for it to cut the benchmark rate to 9 percent this year and raise it to 10 percent in 2013.

“If the central bank errs in its inflation projection of 4.4 percent for 2012, inflation in 2013 would be closer to 6 percent than 5 percent,” Luiz Eduardo Portella, a fund manager at Modal Asset Management, said by phone from Rio de Janeiro. “The central bank emphasized that the confidence of businesses and consumers is improving and this could make economic activity heat up.”

To contact the reporters on this story: Josue Leonel in Sao Paulo at jleonel@bloomberg.net; Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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