Brazilian swap rates rose the most in almost three weeks after retail sales unexpectedly surged and employers added more jobs in July.
Rates on contracts due January 2014 increased 12 basis points, or 0.12 percentage point, the most since July 27, to 7.87 percent. The real rose for a second day, gaining 0.3 percent to 2.0173 per dollar.
Traders pared bets that the central bank will sustain the pace of interest-rate cuts after the national statistics agency said today that retail sales jumped 1.5 percent in June following a 0.8 percent drop the prior month. The gain was bigger than any of the projected increases in a Bloomberg survey of 38 economists, whose median forecast was for sales to fall 0.3 percent.
“The numbers show a trend for a stronger economy,”Marco Freire, head of fixed-income at Franklin Templeton Investimentos Brasil, said by phone from Sao Paulo. “The economy is responding with much more force than the market expected.”
Latin America’s biggest economy created 142,496 government-registered jobs in July, more than the 140,563 jobs created a year earlier, the Labor Ministry said today on its website. Economists forecast 93,750 new jobs in the month, according to the median estimate from 12 analysts surveyed by Bloomberg.
The economy will grow 1.8 percent this year, according to the latest central bank survey of about 100 analysts, down from an expansion of 2.7 percent last year.
President Dilma Rousseff’s government has granted tax breaks for goods including furniture, appliances and automobiles to prop up demand and spur faltering growth. The central bank has also lowered the target lending rate by 4.5 percentage points since August 2011 to a record low 8 percent, saying slower global growth will damp inflation.
Standard Chartered Plc raised its growth forecast for the second quarter to 0.4 percent from 0.2 percent.
The retail sales figure “confirms our view that we are starting to see a pick-up in activity with many of several measures finally having some positive effect,” Standard Chartered economist Italo Lombardi wrote in the research note.
Inflation accelerated in July for the first time in 10 months as adverse weather in Brazil and the U.S. drove up food prices. The inflation rate, as measured by the IPCA index, rose to a four-month high of 5.2 percent, the government reported Aug. 8.
Central bank President Alexandre Tombini will cut the target lending rate to 7.25 percent by October before raising it next year, trading in rate futures indicates.
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