Brazil will cut 44 billion reais ($18.5 billion) from this year’s budget, as policy makers seek to rein in inflation and shore up fiscal management that has sparked warnings of a rating downgrade. Swap rates fell.
The real advanced to the strongest in a week after the Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated response to alleviate a dollar shortage.
Yields on Brazilian interest-rate futures contracts fell for the first time in four days after inflation unexpectedly slowed to within the government’s targeted range last year, prompting bets the central bank has room to speed up interest-rate cuts.
The real headed for the biggest weekly drop since mid-December as signs of muted growth in Europe and concern about intervention on the currency market fanned speculation investment in Brazil will slump.
Brazil’s real headed for the biggest rally among major currencies this week as the U.S. government shutdown added to speculation the Federal Reserve will sustain a stimulus program that has buoyed emerging-market assets.