Brazilian Real Strong Against the Dollar
RIO DE JANEIRO (Dow Jones)–The Brazilian real opened stronger against the U.S. dollar Wednesday, continuing a recent appreciation that has sent the currency to an 11-month high against the greenback.
That means the Real is kicking our butts at the moment. The US dollar just cant buy as much as it used to a year ago and we’re feeling the affects.
The real opened at BRL1.8170 per dollar after closing Tuesday at a fresh 11-month high of BRL1.8230 on the BM&FBovespa exchange. The real later eased off those gains to trade at BRL1.8230 shortly after trading began.
Early trading was subdued ahead of the release of a series of economic data reports in the U.S. that could dictate the market’s mood, traders said.
Further direction will likely come from the release of July factory orders by the U.S. Commerce Department, as well as the Institute for Supply Management’s service-sector activity index. The Department of Energy will also disclose stocks for crude oil and products later in the day.
The day got off to a less-than-auspicious start when ADP said that the private sector shed 371,000 jobs in July. Economists had expected a decline of 350,000.
In Brazil, the central bank will release foreign-exchange flows for July. The country has seen a wave of foreign investment in recent weeks as Brazil’s sound economic fundamentals and resilient economy attracted foreign investors.
Fixed-income investors have been lured by the benchmark Selic base interest rate, which stands at 8.75%. Meanwhile, the Ibovespa stocks index jumped to an 11-month high above 56,000 points on Tuesday.
An improving domestic growth outlook combined with a higher expectations for foreign-investment inflows and Brazilian debt issues has boosted the real currency in recent months, traders said.
Many market watchers expect Brazilian companies to resume overseas bond placements - which would increase inflows further - in the wake of a successful sovereign bond sale. Last week, the Brazilian government placed $525 million in overseas bonds at a yield of 6.45%.
Sugar and ethanol group Cosan (CZZ) announced a $350 million bond placement Tuesday.
The Brazilian Central Bank will likely maintain its recent efforts to contain the real via spot-market purchases of dollars. The central bank has been active in purchases of dollars on the spot market in recent weeks, propping up the dollar in the process and stemming the real’s gains