Brazil’s real swung between gains and losses on speculation the central bank will intervene after the currency touched a four-year low as Standard & Poor’s cut the nation’s credit rating outlook to negative.
The currency appreciated 0.1 percent to 2.1280 per U.S. dollar at 12:25 p.m. in Sao Paulo after touching 2.1533, the weakest intraday level since May 2009.
“There are expectations that the central bank could intervene with a currency swap auction,” Francisco Carvalho, currency director at BGC Liquidez in Sao Paulo, said in a telephone interview.
Yields on interest-rate futures contracts maturing in January 2015 increased three basis points, or 0.03 percentage point, to 9.25 percent after a report showed the annual inflation rate accelerated to 6.50 percent, matching the upper end of policy makers’ target range.
The real has traded in an intraday range of 1.94 to 2.15 per dollar this year as policy makers fluctuated between selling currency swaps to prevent it from falling too much and offering reverse currency swaps to rein in gains.
The central bank sold currency swap contracts worth $1.38 billion on June 5 after selling contracts worth $877 million on May 31 in its first intervention in the foreign-exchange market since March.
S&P lowered yesterday the outlook from stable on Brazil’s BBB rating, which is two levels above junk and in line with Mexico’s and Russia’s. The company cited the country’s sluggish economic growth, weakening fiscal accounts and loss of credibility with investors.
The rating company also cut the outlooks for state-controlled oil company Petroleo Brasileiro SA and government-run utility Centrais Eletricas Brasileiras SA.
To contact the reporters on this story: Blake Schmidt in Sao Paulo at firstname.lastname@example.org; Josue Leonel in Sao Paulo at email@example.com
To contact the editor responsible for this story: David Papadopoulos at firstname.lastname@example.org