Bloomberg News

Brazil Real Declines as Banco do Brasil Insurance IPO Postponed

April 15, 2013

Brazil’s real fell from a one-month high as regulators postponed the initial public offering of Banco do Brasil SA’s insurance unit, diminishing the prospects for investment in the nation’s assets.

The real depreciated 0.6 percent to 1.9807 per U.S. dollar at 10:32 a.m. in Sao Paulo after rallying on April 12 to 1.9695, the strongest level since March 12. Swap rates on the contract due in January 2014 rose six basis points, or 0.06 percentage point, to 8.23 percent.

“The market adjusted to the news of the IPO as there was an expectation that this transaction would bring a lot of inflows to Brazil,” Jose Carlos Amado, a currency trader at Renascenca DTVM in Sao Paulo, said in a telephone interview.

Brazil’s securities regulator suspended for 30 days Banco do Brasil’s 12.2 billion real ($6.2 billion) IPO of its insurance unit, citing in an e-mailed statement the use of “irregular publicity material.”

The real also fell as slowing growth in China, the Latin American nation’s biggest trading partner, overshadowed speculation that policy makers will raise borrowing costs from record lows this week.

China’s gross domestic product grew 7.7 percent in the first quarter from a year earlier, compared with 7.9 percent in the last three months of 2012 and missing the 8 percent median forecast of analysts surveyed by Bloomberg.

Markets ‘Bad’

“The GDP in China shows that the global economy is decelerating,” Andre Perfeito, the chief economist at Gradual Investimentos in Sao Paulo, said in a telephone interview. “The international markets are bad today.”

Finance Minister Guido Mantega and central bank President Alexandre Tombini signaled last week that Brazil’s monetary authority will raise the target lending rate from a record low 7.25 percent after a report showed annual inflation accelerated above its target range for the first time since November 2011.

Minutes of the central bank’s March 5-6 meeting indicated an increase wasn’t imminent as policy makers said “a cautious management of monetary policy” was needed. Board members are due to meet tomorrow and April 17.

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

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


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