Tag Archives: Derivatives

The fund holds the biggest bets against the Brazilian real in more than 3 months – CFTC data | Instant News

BRASILIA, March 5 (Reuters) – Funds and speculators in US futures markets collected their biggest bets against the Brazilian real in more than three months, data showed on Friday, as the latest currency slump prompted this year’s first central bank intervention.

The latest Commodity Futures Trading Commission data on Friday showed that funds increased their net short positions by 5,114 contracts to 21,051 contracts in the week to March 2, the biggest net short since the week ended November 22 last year.

Shortening a financial asset means betting effectively that its value will fall.

Rather than rebounding from 30% against the dollar last year, the real has fallen a further 8.7% so far this year.

The most recent decline over the period captured in the latest CFTC data pushed the central bank into six rounds of direct dollar selling intervention on the spot market between last Thursday and Tuesday, worth more than $ 5 billion.

Apart from the Libyan Dinar and the Sudanese Pound, which both suffered massive devaluations, the real currency is the world’s worst performing currency against the dollar this year, Refinitiv data show.

The central bank is widely expected to raise interest rates for the first time since 2015 sooner than later to fight inflation and a worsening fiscal outlook.

But with the economy likely to shrink in the first quarter due to the second wave of the devastating COVID-19 virus engulfing the country, higher levels could not come at a worse time.

In addition, rising US bond yields draw cash from emerging market assets, leaving currencies as they are actually exposed.

($ 1 = 5.70 reais)

Reporting by Jamie McGeever Editing by David Gregorio


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THE EMERGING MARKET-Brazilian real hits a 4-month low on populist policy concerns | Instant News

    * Most Latam stocks gain
    * Brazilian bank stocks drop after report of higher taxes
    * Real nonplussed by central bank intervention

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    March 2 (Reuters) - Brazil's real sank to a four-month low
on Tuesday after government action to curb fuel prices raised
concerns over a shift to populist policies, while other Latin
American currencies remained on edge over high bond yields. 
    The real plunged 1.4% after President Jair
Bolsonaro said he would issue a decree on Tuesday suspending a
tax on diesel fuel, a move aimed at placating truckers who had
threatened to strike.
    Sources also told Reuters the government would instead hike
taxes on banks' net income to about 23% from 20% to offset lost
    Shares in some of the country's biggest banks, such as Itau
Unibanco, Bradesco and Banco Santander
Brasil, lost between 0.1% and 1%, while the Bovespa
stock index was subdued, having touched a more than
three-month low in the session. 
    Brazil's central bank intervened in the spot foreign
exchange market for the fifth time in four days on Tuesday to
support the currency, which was last trading at 5.68 per dollar.
    Fears of populist policy measures have risen since Bolsonaro
ousted state-run oil company Petrobras' chief
executive in February over disagreements on fuel prices, and
threatened to interfere in other sectors of the
    "The overall news flow since last week has not be conducive
for a positive price action in (Brazil) markets," said Latam
strategists at Citi Research. 
    "Investor optimism will remain suppressed after the
government's meddling to prevent a rise in fuel prices, and the
potential dilution of compensatory measures in the emergency
bill. Thus, we have a negative bias for asset prices in the
    Brazil's government is considering extending an emergency
coronavirus aid program amid worries of breaching the
government's spending cap - an issue that has weighed on
Brazilian assets.
    Concerns over a local variant of the coronavirus have also
undercut Brazilian assets recently, with scientists warning that
it can re-infect people who have previously recovered from the
    Most other currencies in Latin America fell against a steady
to higher dollar, in line with broader emerging market peers as
concerns over spiking bond yields persisted.
    Chile's peso dropped 0.9%, while Colombia's peso
 shed 1%. 
    Emerging market stocks and bonds saw foreign net inflows of
about $31.2 billion in February, though rising U.S. interest
rates triggered a slowdown during the last week, data from the
Institute of International Finance showed on Tuesday.

    Still, other Latam stocks recovered from recent losses, with
equities still being seen as most primed to benefit from an
economic recovery this year. 
    Key Latin American stock indexes and currencies: 
                              Latest       Daily % change
 MSCI Emerging Markets         1362.23                 -0.02
 MSCI LatAm                    2225.75                 -0.46
 Brazil Bovespa              110191.37                 -0.13
 Mexico IPC                   45722.51                  2.09
 Chile IPSA                    4706.93                   1.5
 Argentina MerVal             48144.56                -1.738
 Colombia COLCAP               1350.41                 -0.39 Currencies             Latest       Daily % change
 Brazil real                    5.6817                 -1.42
 Mexico peso                   20.6375                  0.01
 Chile peso                      728.7                 -0.93
 Colombia peso                  3654.5                 -1.00
 Peru sol                       3.6657                 -0.27
 Argentina peso                90.1500                 -0.07
 (Reporting by Susan Mathew and Aaron Saldanha in Bengaluru;
Editing by Jane Merriman and Jonathan Oatis)


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EUROPEAN POWER – Friday prices rose due to lower German winds, solar power output | Instant News

PARIS, February 25 (Reuters) – European spot electricity prices for delivery on Friday rose on Thursday due to lower forecasts for wind and solar power generation in Germany.

* Over-the-counter baseload prices for Friday delivery in Germany rose 6.2% to 48.30 euros per megawatt hour (MWh) at 1009 GMT.

* France’s future contract added 6.2% to 48.25 euros / MWh.

* Power generation from German wind turbines is expected to fall 1.8 gigawatts (GW) day-on-day to 13.4 GW, while solar generation is expected to drop 2.2 GW to 3.6 GW, Refinitiv data show.

* “We expect wind power output to fall in the first half of the day, and increase in the latter half of tomorrow,” Refinitiv analysts said.

* French wind power supply is expected to increase by 1 GW to 3.6 GW, data show.

* Refinitiv forecast shows the average daily German wind power supply will fall to around 3 GW early next week before rising to 8 GW next Friday.

* France’s nuclear capacity reaches 75% of the total installed.

* More than half of EDF’s nuclear reactors could be operational for a decade longer than planned after maintenance work was carried out, French nuclear security watchdog ASN said on Thursday.

* French electricity demand on Friday is expected to rise 700 megawatts (MW) to 56.9 GW and fall in Germany by 390 MW to 64.2 GW, Refinitiv data show.

* Further along the curve, German Cal ’22 baseload power edged up 0.1% to 53.20 euros / MWh, following higher fuel prices.

* France 2022 contract added 0.2% to 54.25 euros / MWh.

* European CO2 allowances expiring December 2021 edged down 0.1% to 39.10 euros per tonne.

* Coal for northern European delivery in 2022 rose 0.9% to $ 69.1 a tonne, after hitting the highest level since February 1 at $ 69.20 earlier in the session. (Reporting by Forrest Crellin; Editing by Emelia Sithole-Matarise)


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EMERGING MARKETS-Asset Latam recovers from recent losses, Petrobras rebound supports stocks | Instant News

    * Drop in U.S. yields helps risk assets
    * Brazil stocks recover from worst day in 10 months
    * Mexican peso rises for first time in 7 sessions

 (Adds details, updates prices)
    By Susan Mathew
    Feb 23 (Reuters) - Brazil shares rose on Tuesday as oil
major Petrobras bounced back from a bruising sell-off, with most
Latin American assets recovering from a slew of recent losses as
pressure from high U.S. yields eased. 
    The Bovespa stock index rose 2.1% after a near 5%
slide on Monday, as shares in Petroleo Brasileiro
recovered 10% from a 22% plunge that wiped out 71 billion reais
($13 billion) in market value. 
    Petrobras' board is set to meet on Tuesday to rule on
Brazilian President Jair Bolsonaro's appointment of former
Defense Minister Joaquim Silva e Luna to helm the state-run
    "Bolsonaro's decision to replace Petrobras' CEO is dashing
hopes of Brazil's return to economic orthodoxy," said
strategists at BCA Research. Analysts broadly note that the
president is adopting populist policies instead of fiscal
consolidation ahead of elections 20 months down the line.
    "The central bank is likely to lift the policy rate in
response... which would keep government borrowing costs above
the nominal GDP growth rate," they said. "A violation of the
fiscal spending rule would weigh further on the real amid higher
inflation expectations, and bonds are likely to underperform as
rates rise." 
    The real rose 0.3% after marking its worst
session in a month on Monday, while dollar bonds and the cost to
insure exposure to Brazil's sovereign debt steadied following
dramatic falls on Monday.
    Charts show that Brazil's weighting is declining in the main
JPMorgan EM bonds index.   
    A recent spike in U.S. treasury yields had weighed on
risk-driven assets, particularly emerging market bonds and
currencies, as investors sought safer investment paths. Latin
American assets fell the most among their peers.
    But yields dropped on Tuesday after Federal Reserve Chairman
Jerome Powell said the economy still needed central bank
    "One reason for Latam FX struggles may be that markets
expect that an inflation overshoot in the U.S. would spill over
to other economies, and would be harder to contain in Latam,
where central bank credibility is perceived to be weaker," said
Ilya Gofshteyn, senior EM macro strategist at Standard
    Mexico's peso rose for the first time in seven days
against a stronger dollar. The peso lost 3.7% over the last six
days on concerns about factory activity as fuel supply from
Texas was impacted by a deep freeze.
    Chile's peso, which has outperformed its regional
peers thanks to strength in the copper price, extended gains
into an eight consecutive session. 
    Key Latin American stock indexes and currencies:
                              Latest     Daily % change
 MSCI Emerging Markets         1393.90             -0.27
 MSCI LatAm                    2330.32              2.07
 Brazil Bovespa              114975.20              2.05
 Mexico IPC                   45274.80              0.73
 Chile IPSA                    4506.23             -1.38
 Argentina MerVal             47672.85            -3.239
 Colombia COLCAP               1351.21             -0.07 Currencies             Latest     Daily % change
 Brazil real                    5.4380              0.30
 Mexico peso                   20.5595              0.75
 Chile peso                      705.4              0.14
 Colombia peso                 3583.72              0.20
 Peru sol                       3.6517              0.00
 Argentina peso                89.5300             -0.10
 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru,
graphic by Marc Jones in London; Editing by Nick Macfie and
Rosalba O'Brien)


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THE EMERGING MARKET-Brazil stocks hit by fears of government interference, FX falls | Instant News

    * Petrobras, Bovespa set for worst day since March
    * Coronavirus aid extension in Brazil to be discussed this
    * Mexican peso down for sixth straight session 
    * Chile's peso sole gainer 

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    Feb 22 (Reuters) - Brazil's benchmark Bovespa index tanked
on Monday as oil major Petrobras plummeted 21% following the
ouster of its investor-backed chief executive, while Latin
American stocks and currencies fell as higher inflation
expectations hurt sentiment. 
    After weeks of sparring between CEO Roberto Castello Branco
and Brazilian President Jair Bolsonaro on fuel prices, former
Defense Minister and retired army general Joaquim Silva e Luna,
who has no oil and gas experience, was appointed to take over.

    Branco's ouster could force a broader shakeup at Petrobras,
which has steered toward more market-friendly and less
politically driven policies in recent years.
    Petrobras shares were on course to
post their sharpest one-day decline since March last year, as
was the Bovespa, which sank nearly 4%.  
    "The reversal of these types of practices by Bolsonaro early
in his administration was a key credit positive for Brazil's
quasi-sovereigns," said Citigroup strategists. 
    "A reversal of this policy is a clear credit negative."
    Banco do Brasil, caught up in a spat with
Bolsonaro over branch closings, slumped 11%, while power company
Eletrobras skidded nearly 3% amid signs of the
president's interference in the power sector.

    Brazil's real fell as much as 2.8%, hitting
lows not seen since November last year, while the cost to insure
exposure to Brazil's sovereign debt jumped 22 basis points from
Friday's close.
    "Local assets will underperform across the board in the very
short-term," Citigroup warned, adding that a break in the key
5.50 level of dollar-real pair could see further continuation of
weakness in the real.  
   Investors also have their eyes on a discussion regarding an
extension of Brazil's emergency aid bill this week, with eyes on
cost cuts elsewhere to keep spending within the limit.

    Worries about stretched fiscal spending have caused the real
to lag its emerging market peers widely in 2020. This year, the
currency is down about 6% so far.  
    Other currencies in Latin America also
dropped, pressured by rising U.S. Treasury yields and inflation
    Higher U.S. yields pressure risk-driven assets by offering
relatively stronger and safer returns. 
    In its sixth straight day in the red, Mexico's peso
hit its lowest since early November as a deep freeze in Texas
continued to raise concerns about a hit to factory activity in
the country.
    A corresponding surge in oil prices failed to support the
peso, while Colombia's peso also dropped.
    Surging copper prices saw Chile's peso as the only
gainer for the day. 
    Key Latin American stock indexes and currencies:
                              Latest      Daily % change
 MSCI Emerging Markets         1402.48               -1.93
 MSCI LatAm                    2311.50                -3.8
 Brazil Bovespa              114019.83               -3.72
 Mexico IPC                   45035.62                 0.3
 Chile IPSA                    4569.36               -1.18
 Argentina MerVal             49446.07              -3.033
 Colombia COLCAP               1348.63               -0.29 Currencies             Latest      Daily % change
 Brazil real                    5.4412               -1.08
 Mexico peso                   20.6505               -1.09
 Chile peso                      706.1                0.27
 Colombia peso                    3591               -0.60
 Peru sol                       3.6518                0.00
 Argentina peso                89.4300               -0.30
 (Reporting by Susan Mathew in Bengaluru; Editing by Steve
Orlofsky and Dan Grebler)


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