Brazil Real Falls; Some Importers Buy Dollars: Latin Currencies
May 30 (<a href=quote.bloomberg.com>Bloomberg) -- Brazil's real fell for the first day in three as companies took advantage of a two-day, 3.2 percent surge in the real to pay for imports.
Brazil's real tumbled 1.1 percent to 2.9675 per dollar, the currency's first decline in three days, at 3:42 p.m. New York time. The real has gained 19 percent this year, the best performance of the world's 16 most traded currencies.
The market seems to be entering a period of equilibrium where the real is holding around 3 to the dollar,'' said Flavio Datz, a trader with Agora CTVM a securities brokerage in Rio de Janeiro. When the real gains, importers buy, when it falls exporters sell.''
The sale of more than $5 billion of foreign debt by Brazilian banks and companies this year has helped the real rise as the inflow of capital has increased demand for reais. This week, though, Brazil said it would no longer promise to refinance all securities used to insure against declines in the real, raising investors' expectations they may have to buy dollars to hedge against a weaker real.
Such factors are likely to keep the real in the 2.85 to 3.10 range, said Tony Volpon, a Sao Paulo economist with New York-based Dinosaur Securities.
Future Battle
The real may also be falling as large investors, including the Treasury desks of Brazil's major banks, try to push the value of dollar futures contracts to pre-set strike prices that offer them the largest profit when they expire Monday.
Today is the last day of trading for 113,961 dollar futures contracts on Sao Paulo's BM&F futures and commodities exchange. At settlement, the contracts will yield the equivalent of the exchange rate variation on $5.7 billion.
Each contract has an investor betting the dollar will rise and another betting it will fall. The contracts are settled using the central bank's Ptax exchange rate, a rate calculated using average exchange rates culled from the spot market.
It's hard to tell how much the a Ptax-battle is influencing the day's rate, but it is often a factor in the rate at the end of the month'' Datz said. There's a lot at stake, and if you can influence the settlement price, you'll try.''
The U.S. dollar contract for July settlement, the most traded on Sao Paulo's BM&F commodities and futures exchange, rose 1.0 percent to 3.023 reais to the dollar. The June contract rose 0.7 percent to 2.964.
Brazil's 8 percent bond maturing in 2014 fell for a second day, losing 0.38 cent to 89.06 cents on the dollar, raising the yield to 10.72 percent, according to J.P. Morgan Chase & Co.
Regional Currencies
Mexico's currency was little changed after two days of gains, exchanging hands at 10.3070 pesos per dollar from 10.3095 per dollar yesterday, leaving it with a 0.6 percent gain against the dollar in 2003.
The peso fell to a record low of 11.2644 on March 6 on concern the war in Iraq would send oil prices up from 12-year highs, slowing worldwide growth and investment, especially in the U.S., which buys 85 percent of Mexico's exports, representing more than a quarter of its $600 billion economy.
Daily sales of $32 million by the Banco de Mexico announced March 20 and begun on May 2 have strengthened the peso and seen rates on 28-day Treasury notes fall to 4.91 percent this week from 9.83 on March 11.
Argentina's peso rose for the first day in three, gaining 0.6 percent to 2.8650 per dollar from 2.8825 yesterday, boosting its gains against the dollar to 17 percent, the second-best performance among 59 currencies tracked by Bloomberg.
Chile's peso was little changed, exchanging hands at 711.35 per dollar from 711.85 yesterday and has gained 1.5 percent in 2003. Colombia's peso strengthened for the second day in three, rising 0.4 percent to 2,849.25 per dollar, while Peru's new sol was unchanged at 3.4945 per dollar. Venezuela earlier this year fixed its bolivar at 1,598 per dollar.