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