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SAO PAULO—the closing of the Brazilian real Friday was its strongest in the past seven years. In comparison to the U.S. Dollar, Brazilian Real had the strongest level in seven years. The rise was in amidst of heavy influx of dollars from investors.
The closing of Real Friday saw BRL at 1.867 comparing with a dollar. BRL improved .006 or 0.32% from its previous closing of 1.873 on Thursday (previous record).
Central Bank of Brazil tried to check the Brazilian Real onward procession by “Two Spot Dollar” Auctions. A U.S. dollars was bought at BRL1.8726 during the midday. The prices for dollar purchase reduced to BRL1.866 by the session closing.
Two Spot Dollar Auctions was implemented throughout the day on quantities of dollar that were undeclared. However, the Exchange Rate of Dollars barely had any affect by the purchases.
According to the information gathered, traders believed that The Central Bank of Brazil was attempting to decrease the liquidity in the middle of one-off inflows that it took major proportion.
Brazilian Real had an Initial Public Offering this week in the form of Redecard. The IPO had major purchases by the Foreign Investors and raised BRL4.07 bn on Bovespa.
According to the chief economists of a brokerage firm of Sao Paulo, Mr. Andre Ng, Redecard was the major cause of massive capital influx in Brazilian Real.
The overheating of U.S. economy was probably a reason that Foreign Investors considered while planning a shift back to the local assets.
From the officials of U.S. Commerce Department today, it was received that the retail sales saw a drop of 0.9% from the figure of last month. The retail sales figure gave an unexpected result as most Economic Survey, including the one by Down Jones, expected a drop of only 0.1%.
U.S. Treasury rose with the drop in retail sales and gave major investors an increased appetite towards asset from rising markets. Brazilian Market was targeted for that reason.
Continuous increasing Trade Balance of Brazil can be labeled the reason of the “Emergence of the Real”.
Interest rates are reduced by the Central Bank based on the influx of funds from major investors in Brazil. According to FGV (Getulio Vargas Foundation) on last Friday, the IGP-M (General Price Index) had an increase of 0.15% during 21-30 June compared to 0.31% during 21-31 May. Current figures show that the forecasts of 0.10-0.22% are very much achievable and can even cross with this rise. Investors are predicting reduced interest rates in credit markets if such pattern of influx continues.
Traded interest rates have come down from yesterday’s 10.62% to 10.57% in the Brazilian Mercantile and Futures Exchange and are reflecting what to expect in the near future.
22:52
Posted on Jul-13-2007
