Brazil’s real (CME:BRN14) dropped to a one-week low as accelerating U.S. inflation added to speculation that the Federal Reserve will curtail a stimulus program that has supported emerging-market assets and weakened the dollar (NYBOT:DX).
The real fell 0.4 percent to 2.2437 per dollar at 10:18 a.m. in Sao Paulo, dropping along with most developing-nation currencies. Local foreign-exchange trading will end at noon today as Brazil plays Mexico in the World Cup. Swap rates on contracts maturing in January 2017 climbed seven basis points, or 0.07 percentage point, to 11.58 percent.
“CPI in the U.S. came above expectation, and that shows the economy there is recovering,” Reginaldo Galhardo, foreign- exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a telephone interview. “That is giving support to the dollar against several currencies and is the main driver for the real to lose value now.”
A U.S. Labor Department report before tomorrow’s Fed statement indicated that consumer prices increased 0.4 percent, the biggest advance since February 2013. In Brazil, slowing economic growth spurred the central bank to hold its target lending rate at 11 percent on May 28 after nine consecutive increases to curb inflation.