By Bruno Federowski
SAO PAULO, May 16 The Brazilian real
strengthened on Tuesday after the central bank resumed currency
intervention, providing support for the currency ahead of a key
vote on pension reform.
The Brazilian real firmed as much as 0.6 percent
before paring gains to around 0.4 percent as traders booked
profit on a six-day stretch of gains.
The central bank sold $400 million worth of traditional
currency swaps, which correspond to sales of dollars to
investors for future delivery, to roll over June contracts.
Should it maintain that pace of sales daily throughout the
end of May, as it has done in previous months, it will roll over
all of the $4.4 billion worth of maturing swaps.
The move comes as the lower house of Congress prepares to
vote on President Michel Temer's flagship revamp of the Brazil's
costly pension system, which investors see as key to curtail
growth of public debt and stave off an economic recession.
Traders say the approval may trigger additional strength in
the real, which has failed to rise consistently past 3.10 to the
dollar since early February. Temer said on Monday a vote could
take place by late May, though he still does not have the votes
to pass it at this moment.
The real's move up also tracked strength in other Latin
American currencies, after weaker-than-expected U.S. housing
figures supported expectations of a slower pace of interest rate
increases in the country, potentially increasing appetite for
riskier emerging-market assets.
Still, yields on Brazilian interest rate futures contracts
fell as traders bet the central bank could accelerate
interest rate cuts this month to a brisk 1.25 percent basis
points, taking the benchmark Selic rate to 10 percent.
Weaker-then-expected economic figures led economists at
Banco BTG Pactual SA to forecast a 125 basis-point cut this
month, followed by 100 basis-point and 75 basis-point reductions
in July and September.
Key Latin American stock indexes and currencies at 1510 GMT:
Stock indexes daily % YTD %
Latest change change
MSCI Emerging Markets 1013.97 0.37 17.16
MSCI LatAm 2750.95 -0.02 17.55
Brazil Bovespa 68193.56 -0.41 13.23
Mexico IPC 49693.44 0.03 8.87
Chile IPSA 4870.02 -0.43 17.31
Chile IGPA 24427.00 -0.34 17.81
Argentina MerVal 21740.26 0.38 28.50
Colombia IGBC 10829.27 -0.38 6.92
Venezuela IBC 63241.23 1.84 99.47
Currencies daily % YTD %
Brazil real 3.0942 0.36 5.01
Mexico peso 18.6310 0.40 11.34
Chile peso 665.8 0.33 0.74
Colombia peso 2871.53 0.26 4.53
Peru sol 3.257 0.18 4.82
Argentina peso (interbank) 15.5700 -0.26 1.96
Argentina peso (parallel) 15.93 0.25 5.59
(Reporting by Bruno Federowski; Editing by Andrea Ricci)