Brazil’s real tumbles on news central bank head may step down
by Agency Staff,
2016-03-16 19:58:55.0
SAO PAULO — Brazil’s real led losses in Latin America as traders dumped the currency following a news report that the central bank president may step down, adding to political turmoil that has rattled markets this week.
The real slumped for a third day, losing 1.4% to 3.8202 per dollar at 10.25am in Sao Paulo. One week implied volatility climbed 1.55 percentage point to 28.275%, the highest among the world’s most-traded currencies.
After driving up the currency to a six-month high last week, the market has gone from hot to cold as a spreading corruption scandal deepens the country’s political crisis.
Valor Economico columnist Claudia Safatle reported on Wednesday that central bank president Alexandre Tombini may ask to leave his post. It comes on top of news reports that former president Luiz Inacio Lula de Silva, may join the cabinet, a move that could shield him from investigations into corruption allegations.
His nomination signals a dramatic shift in economic policy, Safatle said.
"There’s a risk-aversion mood because of the lack of clarity on the terms of Tombini’s exit and his potential replacement,"said Joao Paulo de Gracia Correa, a foreign-exchange director at SLW Corretora de Valores in Curitiba, Brazil. "Traders are speculating Lula could be coming in and bringing his team and we are uncertain of what all of this means."
The political turmoil has become a key driving force in Brazilian markets in recent months. Investors had piled into stocks, bonds and the currency in the first two weeks of March on mounting speculation that Ms Rousseff would be ousted, potentially ushering in new leadership that could reduce the budget deficit.
Swap rates on the contract maturing in January 2017, a gauge of expectations for interest-rate moves, fell 0.04 percentage point to 13.83%.
Bloomberg
Picture: ISTOCK
SAO PAULO — Brazil’s real led losses in Latin America as traders dumped the currency following a news report that the central bank president may step down, adding to political turmoil that has rattled markets this week.
The real slumped for a third day, losing 1.4% to 3.8202 per dollar at 10.25am in Sao Paulo. One week implied volatility climbed 1.55 percentage point to 28.275%, the highest among the world’s most-traded currencies.
After driving up the currency to a six-month high last week, the market has gone from hot to cold as a spreading corruption scandal deepens the country’s political crisis.
Valor Economico columnist Claudia Safatle reported on Wednesday that central bank president Alexandre Tombini may ask to leave his post. It comes on top of news reports that former president Luiz Inacio Lula de Silva, may join the cabinet, a move that could shield him from investigations into corruption allegations.
His nomination signals a dramatic shift in economic policy, Safatle said.
"There’s a risk-aversion mood because of the lack of clarity on the terms of Tombini’s exit and his potential replacement,"said Joao Paulo de Gracia Correa, a foreign-exchange director at SLW Corretora de Valores in Curitiba, Brazil. "Traders are speculating Lula could be coming in and bringing his team and we are uncertain of what all of this means."
The political turmoil has become a key driving force in Brazilian markets in recent months. Investors had piled into stocks, bonds and the currency in the first two weeks of March on mounting speculation that Ms Rousseff would be ousted, potentially ushering in new leadership that could reduce the budget deficit.
Swap rates on the contract maturing in January 2017, a gauge of expectations for interest-rate moves, fell 0.04 percentage point to 13.83%.
Bloomberg
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