The real appreciated 1.8 percent this week to 2.3457 per U.S. dollar, the strongest closing level since Jan. 20. It rose 1.1 percent in Sao Paulo today. Swap rates maturing in January 2016 fell five basis points, or 0.05 percentage point, to 11.77 percent, extending their decrease since Feb. 14 to 46 basis points.
Finance Minister Guido Mantega said today on a conference call that Brazil will make an extra effort to meet its fiscal goals if a boost in spending is needed to compensate for higher energy costs. The government announced yesterday that it would cut 44 billion reais from this year’s budget, allowing Brazil to meet a primary surplus target, excluding interest payments, of 1.9 percent of gross domestic product.
To support the real and limit import price increases, Brazil sold $197.5 million of foreign-exchange swaps today under a program announced in December. The central bank also held an auction to extend maturities on swaps due in March, rolling over $516.8 million.
Shorter-term swap rates climbed earlier today as the national statistics agency reported that consumer prices rose 5.65 percent in the 12 months through mid-February, higher than the median forecast of 5.62 percent from economists surveyed by Bloomberg and the central bank’s 4.5 percent target.
Brazil lifted the benchmark lending rate on Jan. 15 by 50 basis points for a sixth consecutive meeting, increasing it to 10.50 percent. The central bank has raised borrowing costs by 325 basis points since April.