Tag Archives: Currency Intervention

UPDATE 1-Brazil’s stable currency to ease inflationary pressures, said the head of cenbank | Instant News

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BRASILIA, Nov 26 (Reuters) – Brazil’s currency appears to have stopped weakening and is now stabilizing, suggesting the upward pressure on inflation from this year’s persistently weak exchange rate will disappear, Roberto Campos Neto, president of the central bank, said on Thursday. .

In an online interview with media outlet MyNews, Campos Neto said the central bank is taking a longer-term view on inflation, and there is little to suggest long-term price pressures have changed much or inflation will exceed the bank’s target next year.

“We see that the exchange rate has stopped (weakened), or has been at this level for some time, so we think this effect (on inflation) will weaken,” said Campos Neto.

The Brazilian real has become one of the worst performing currencies in the world this year, falling nearly 30% against the dollar due to record low interest rates and uncertainty surrounding the government’s fiscal stability.

This, along with rising food prices and strong consumer demand thanks to the government’s emergency aid payments, has pushed inflation to the point where many economists now say the central bank will start raising interest rates early next year than they previously expected.

The real fell as low as 6.00 per dollar earlier this year but has recovered, and is now testing a key technical level on the 200-day moving average.

Campos Neto said the central bank is not looking at daily inflation, but is taking a longer-term view.

“It’s not just the central bank that thinks long-term inflation expectations won’t increase. The market doesn’t think so either. It’s important to show this, “he said.

The central bank’s official inflation targets for this year, next year and 2022 are 4.00%, 3.75% and 3.50%, respectively. According to the central bank’s latest weekly survey of economists, inflation will fall this year and next year, reaching 3.50% by 2022.

But producer price inflation data on Thursday showed upward pressure remained strong, with factory gate prices in October rising at a record monthly 3.4%.

Reporting by Jamie McGeever and Marcela Ayres; Edited by Toby Chopra and Paul Simao


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UPDATE 1-The Brazilian economy minister said the real slump overshot, said the rate should be close to 5.00 / dollar | Instant News

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BRASILIA, Nov 23 (Reuters) – Brazilian real, which hit a record low in May and fell 30% against the dollar this year, has crossed the line, Economy Minister Paulo Guedes said on Monday, pegging its equilibrium level to near 5.00 per dollar.

In an online event hosted by financial research firm Empiricus and fintech Vitreo, Guedes said the treasury would have no problem rolling out more than 600 billion reais of debt in the first four months of next year, half of which was sourced.

Guedes reiterated his view that Brazil’s policy mix is ​​one of low interest rates and a weak exchange rate, the opposite of what was under the previous administration when interest rates exceeded 10% and real was as strong as 2.00 per dollar.

“The economy is much healthier with an interest rate of around 2% and an exchange rate of 5.00 … that’s much better. The exchange rate even exceeds, “said Guedes.

“When you change the equilibrium level (between the interest rate and the exchange rate), you get a big move past the equilibrium level and then back again. I think we have crossed the line, if we make progress with reforms, “said Guedes.

In May, the real value weakened to nearly 6.00 per dollar, and on Monday ended trading around 5.45 per dollar. Guedes and central bank officials said the weak exchange rate was a natural consequence of interest rates being cut to a record low of 2.00%.

The central bank has intervened to sell billions of dollars in the spot and derivatives markets this year to slow real declines. Guedes also said on Monday that a weak currency boosted exports and low interest rates sparked a construction boom.

In his broad remarks, Guedes also said he did not “see any problem with this government (refinancing),” adding “we don’t think we are in a dramatic situation.”

He said 300 billion reais of the 600 billion reais to be refinanced in Jan-April were covered. He pointed to 200 billion reais of central bank cash transferred to treasurers and more than 100 billion from deleveraging of public banks.

$ 1 = 5.45 reais Reporting by Jamie McGeever and Marcela Ayres; Edited by David Gregorio


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Prospect of Brazil’s interest rate in 2021 rising to 3.00% – cenbank survey | Instant News

BRASILIA, Nov 23 (Reuters) – Brazil’s inflation outlook for next year rose for the fifth week in a row, a central bank survey showed on Monday, prompting economists to raise its year-end average interest rate forecast to 3.00% from 2, 75%.

Economists also raised their 2020 inflation outlook for the 15th consecutive week, according to the central bank’s latest “FOCUS” weekly survey.

Inflation in Latin America’s largest economy has shot higher recently due to a surge in food and commodity prices triggered by a weakening exchange rate and supply shocks due to the COVID-19 pandemic.

The Ministry of Economy and central bank officials insisted that the spike was “temporary” and had nothing to do with long-term inflation expectations, which remained strong and well below the central bank’s official target.

But steadily higher increases now spread to the interest rate outlook. Economists now expect the central bank’s Selic rate to end next year at 3.00%, compared with 2.75% last week.

That would imply a 100 basis point tightening from the current record low of 2.00%.

The FOCUS survey of about 100 economists on Monday showed the average inflation forecast for the end of 2021 rose to 3.4% from 3.2% in the previous week.

That’s still below, but closer to, the central bank’s 2021 official goal of 3.75%.

The average end-of-2020 inflation forecast rose for the 15th week to 3.5% from 3.3%, still well below the central bank’s target of 4.00%. A month ago, however, the forecast was 3.0%.

Central bank president Roberto Campos Neto recently said the surge was “temporary, but we are clearly monitoring it”. (Reporting by Jamie McGeever; Editing by Alex Richardson)


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UPDATE 1-cenbank Brazil to intervene in FX in view of dysfunction from $ 15 billion ‘overhedge’ flow | Instant News

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BRASILIA, Nov 18 (Reuters) – Brazil’s central bank will intervene in the foreign exchange market if the market is unable to absorb the “large” outflows of expected reais by the end of the year as local banks release so-called overhedge positions, monetary policy director the bank, Bruno Serra, said on Wednesday.

Speaking at a live online event hosted by the Valor Economico newspaper, Serra said this should come as no surprise, as central banks are acting to ensure the market functions smoothly, regardless of nominal exchange rates.

“The central bank has never denied that this volume of about $ 15 billion … is enormous. There is a risk that the market will not have the capacity, depth, to digest it, ”said Serra.

“Our job at the central bank is to ensure the market functions smoothly. If we think the market can’t digest this volume, it affects the functioning of the market … (we) will act. This is normal, not surprising, “he said.

Brazilian banks will release half of their so-called overhedge trading to hedge their FX exposure to offshore equity investments by December 31 for tax purposes.

Serra said this total exposure was under $ 30 billion, half of which would be canceled by the end of the year. That’s about $ 50 billion earlier this year.

The Brazilian real has slumped about 30% against the dollar this year, making it one of the world’s worst performing currencies against the greenback and prompting central banks to sell billions of dollars in the spot and derivatives markets to slow losses.

Central bank’s director of economic policy Fabio Kanczuk had rattled off last week after he said the bank would help markets absorb anticipated overhedge flows. The central bank issued a statement shortly after, saying it had never marked an intention to intervene beforehand.

Serra said the FX market is currently less liquid than before the COVID-19 pandemic hit, and although volatility has eased recently as overseas players have returned to the market, it is still higher than policymakers want.

Once the uncertainty surrounding the overhedge flows has passed, the volatility of the currency market will ease further, Serra said. (Reporting by Jamie McGeever and Isabel Versiani in Brasilia, Editing by Matthew Lewis)


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Australian, New Zealand stocks surged as markets supported Biden’s win | Instant News

(Reuters) – Australian stocks closed higher on Monday, after posting their best intraday session since early March, as investors expected an election win for US President-elect Joe Biden to usher in a period of calmer global trading.

FILE PHOTOS: A board displaying stock prices is seen on the Australian Stock Exchange (ASX) in Sydney, Australia, 9 February 2018. REUTERS / David Gray

An outcome that is likely to keep Republicans still in Senate control would also mean legislative bottlenecks, which could hurt Democrats’ agenda of introducing higher corporate taxes and tighter financial regulations, analysts said.

With all the major indices trading in green, the benchmark index is S & P / ASX 200 .AXJO rose for the third session to close 1.8% higher.

“Being president of Biden might eliminate some of the potential volatility in terms of global trade,” said James Tao, market analyst at CommSec.

“This means less tax disruption and tax reform. “It’s definitely something that businesses have been rallying on,” he added.

“When it comes to relations with the US, Australia has always had very strong ties that big changes are unlikely. But you could say there is definitely no downside. “

On the house front, Australian mining stocks .AXMM was the biggest winner, noting their best session since June 16 as iron ore futures jumped nearly 5%. [IRONORE/]

The global mining giant, BHP BHP.AX and Rio Tinto RIO.AX each up more than 3%.

Technology sub-index .AXIJ rallied 2.8% to hit a record high with buy-now-pay-later company Afterpay APT.AX added as much as 4.5%.

Biden’s win is likely to lead to increased domestic production of the metal used to make electric vehicles, solar panels and other products critical to his climate plans.

Lifting further risk appetite were comments from the state of New South Wales saying it would move to renewable energy and aim to attract A $ 32 billion ($ 23.35 billion) worth of private investment into the sector in the next decade.

Renewable energy stocks such as Genex Power GNX.AX and the Hazer Group HZR.AX ends in positive territory.

Across the Tasman Sea, New Zealand’s leading S & P / NZX 50 index .NZ50 ended 1.8% stronger after hitting record highs during the session.

According to a Reuters poll, the central bank is seen holding the official interest rate at 0.25% at its monetary policy meeting on Wednesday.

($ 1 = 1.3704 Australian dollars)

Reporting by Deepali Saxena, Editing by Sherry Jacob-Phillips


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