Brazilian Swap Rates Decline

The swap rates of Brazil have experienced the biggest decline in the last 3 months after the minutes of the Central Bank of Brazil indicated that the target lending rate is not going to be increased right at this point of time. The swap rates which are due in January, 2014 experienced a fall of 12 basis points and are currently at 7.84%. This marks the biggest decline for the swap rates since 6th December. Incidentally, Real, the major currency of this Latin American country has changed little as it is currently trading at 1.9717 per USD. With today’s slight gain, it has been able to snap the losing streak of last 3 days.

In the minutes of the meeting that was held on last week, the Central Bank has stated that the monetary policy needs to be managed cautiously. On 6th March, the target lending rate of the country was kept at a record low of 7.25%. Apart from that, the policy makers eliminated the pledge which was made in last October to keep the borrowing costs unchanged for a long period of time.

According to the Managing Partner of Leme Investimentos, Paulo Petrassi, as the policy makers have said that they will closely administer the monetary policy, this sends a clear message to the investors that a rate hike is not imminent, at least for near future. Petrassi added that this statement removes any chances of increasing the rate in this April.

According to a survey published right in this week, the economists have cut the forecasts for growth of Indonesia in 2014. It is expected that the Gross Domestic Product of Indonesia will expand 3.5% in 2014, the prior projection of being 3.65%.

The retail sales of Brazil have increased by 7.1% in January, from its value a year earlier. This is lower than the initially forecasted increase of 8%. Incidentally, this sales volume includes auto parts, construction materials and autos.

On 8th March, the Real went to 1.9442, a 10-month high value. To weaken the same, the Central Bank sold $1 billion worth reverse foreign exchange swaps on 11th March. Incidentally, it has swung between selling the currency swaps to stop Real from going down too quickly and offering the reverse currency swaps for protecting the exporters’ interest. Real was pushed down by 11% and 9% respectively in 2011 and 2012.