Brazil
Real Gains on Optimism Over Inflows, Inflation Outlook
Brazil's currency gained on optimism that slowing inflation will help lure more investments to Latin America's No. 1 economy, bolstering dollar flows that have made the real the best-performing currency in the past year.
Economists in a weekly central bank survey reduced their 2006 inflation forecast to 3.73 percent from 3.74 percent a week earlier. Slower inflation preserves the value of local-currency securities, which continue to offer attractive premiums over comparable U.S. assets, said Carlos Allievi at Banco Fibra.
"The scenario here is very good, with low inflation and a growing trade surplus, which should guarantee that flows will remain strong,'' said Allievi, a trader at the Sao Paulo-based bank. The real has gained 14 percent in the past 12 months, the best performance among 70 currencies tracked by Bloomberg.
The real rose 0.2 percent to 2.1430 to the dollar at 8:55 a.m. New York time from 2.1468 per dollar on Aug. 18. The real traded as strong as 2.1260 per dollar Aug. 16, the highest since reaching an intraday high of 2.0968 on May 12.
Strong flows from exports will also help extend the real's rally, Allievi said. Economists expect a trade surplus of $41.2 billion this year, up from an earlier estimate of $41 billion, according to the central bank survey of about 100 economists at financial institutions taken Aug. 18 and published today.
(Published Bloomberg, August 21, 2006)
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