Brazil Allows Sovereign Fund to Trade Currency Derivatives; Real Weakens

The real fell 0.5 percent to 1.6925 per U.S. dollar at 10.59 a.m. in Sao Paulo. Photographer: Adriano Machado/Bloomberg

Brazil allowed its sovereign wealth fund to trade currency derivatives, signaling President Dilma Rousseff’s administration is ready to take additional measures to curb the rally in the real.

Brazil Sets Reserve Requirements for Currency Positions to Stem Real Rally

Monetary Policy Director Aldo Mendes. Photographer: Sebastian Bravo/Bloomberg

Brazil’s central bank set reserve requirements on short dollar positions held by local banks in its third attempt since October to stem a rally in the currency. The real fell for a third consecutive day.
The new rules have the potential to reduce short positions in the dollar to $10 billion from $16.8 billion in December as banks seek to avoid paying reserve requirements on currency operations, Aldo Mendes, the central bank’s director of monetary policy told reporters in Brasilia.

Brazil Trade Surplus Fell 20% Last Year on Currency Gains, Economic Growth

Brazil’s trade surplus shrank 20 percent last year, as domestic consumption boost imports and manufacturers cope with a real rally.

The trade surplus fell to $20.3 billion in 2010 from $25.3 billion in the previous year, the Trade Ministry said today. The December trade surplus was $5.4 billion. Economists expected a trade surplus of $4.5 billion last month, according to the median forecast from 12 economists surveyed by Bloomberg.

Foreign sales reached a record $201.9 billion last year, the ministry said. That’s an increase of 32 percent over the $153 billion sold abroad in 2009. Brazil’s imports were $181.6 billion in 2010 and $15.6 billion in December, the ministry said.