The major currency of Brazil, Real has jumped to a value that’s the highest in last 7 days. The Central Bank of Brazil has increased inflation forecasts, thereby spurring speculation that the policy makers of the country will be allowing Real to strengthen. This will ensure curb in price increases.
The currency has experienced an increase of 0.1% on today and is currently priced at 2.0083 per USD. This marks the strongest level of the currency on a closing basis since 20th March. Incidentally, on this quarter ending on 31st March, Real has advanced by 2.2%. Swap rates which are due in January, 2014 experienced a fall of 1 basis point and is currently at 7.73%.
Gustavo Rangel, who works as the Latin American chief economist of the ING Bank NV, stated that the report shows that the Central Bank of Brazil is more worried about the inflation at this point of time. Incidentally, the Central Bank of Brazil has increased the market scenario forecast for inflation in the current year to 5.8%. This is 0.9% more than the previous value of 4.9%. On the other hand, the reference scenario inflation forecast has also been increased to 5.7%, from its previous value of 4.8%.
Incidentally, on yesterday, for the first time in last 7 days, Real experienced a surge. The increase mainly happened because of the Central Bank’s decision to sell currency swaps so that the decline can be limited. This sort of intervention was done for the 1st time since 11th March, when the Central Bank decided to sell reverse currency swaps in an attempt to cause decline to the value of Real.
Incidentally, the President of Brazil, Dilma Rousseff is currently in South Africa for the BRICS (A group consisting of emerging powers in the world: Brazil, Russia, India, China and South Africa) meetings. She stated that any sort of anti-inflation policy should not sacrifice the growth of the country. This fueled speculation that the Brazilian Government will be trying to control price increases by allowing appreciation of Real. This will be done putting off the projected increase of the borrowing costs. While talking about the country’s monetary policy, Dilma stated that whatever it will be, the main motto of curbing inflation will still hold. According to Dilma, her Government is committed to curb the high inflation in this Latin American country.