Forex Blog: Currency Trading News & Analysis.

May 7th 2007

Brazil Aims to Curb Appreciation in Real

According to Bloomberg markets, Brazil’s currency, the Real, is the best performer this year among 16 major currencies that Bloomberg tracks.  It should come as a wonder to no one, since the country boasts a surging economy and one of the developing world’s highest benchmark interest rates, at 12.5%.  Brazil’s case is further helped by an air of stability, a perception which has brought billions of dollars of foreign capital into Brazil and is contributing to the country’s $50 Billion-a-year trade surplus.  Last week, Brazil’s Central Bank, took its boldest step yet in stemming the rise of Real, by engaging in a large series of reverse currency swaps, in which the Bank essentially bought USD in the futures market.  Analysts interpreted the move as a sign that Brazil is about cut interest rates.  Bloomberg News reports:

“Now, if this is not a sign that they are holding the real and will have to cut 50 basis points at the next monetary policy meeting, I don’t know what is,” said one economist.

Read More: Brazil’s Real Falls on Reverse Currency Swap Contracts Sale

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Posted by Adam Kritzer | in Central Banks, Emerging Currencies | No Comments »

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