Options Bets Against Brazil ETF Jump to Highest in Three Years

Options traders are placing more bearish bets against a U.S. exchange-traded fund tracking Brazil than any time in three years, as policy makers raise borrowing costs to tame inflation in Latin America’s biggest economy.

The ratio of put options to sell the iShares MSCI Brazil Index Fund versus calls to buy has jumped 60 percent in the past two months to 1.76 and on Feb. 3 reached 1.81, the highest level since January 2008. The last time it reached this level, the fund tracking 83 securities plunged 62 percent over the next 10 months. The fastest-growing bets are February $69 puts. The fund hasn’t closed below $69 since Aug. 31 and fell 1 percent to $71.32 yesterday.

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.

Brazil Interest Futures Rise on Central Bank Signal

Brazil’s interest-rate futures yields on contracts due before July 2012 rose as the central bank’s signal that it will raise rates to curb price increases offset a report showing inflation quickened less than expected.

Investors increased bets the central bank will raise its benchmark Selic interest rate, with the yield on the contract due July 2011 adding 6 basis points to 11.65 percent by 6:38 a.m. New York time, the highest intraday level since Dec. 8. On the agreement due April, the yield advanced 4 basis points to 11.15 percent.

Panamericano Posts Biggest Two-Day Drop Since Probe After Reserves Lifted

Banco Cruzeiro do Sul SA sank 2.3 percent to 14.75 reais. Moody’s Investors Service cut their outlook on their Ba ratings to negative from stable for four Brazilian banks -- Banco BMG SA, Banco Cruzeiro do Sul, Banco Bonsucesso SA and Banco Schahin SA. Profits may be hurt after capital requirements were increased for long-term vehicle financing and loans deducted from payroll income, Moody’s wrote.

Investors To Pay $1.8B For 18.65% Stake In Brazil's BTG Pactual

SAO PAULO (Dow Jones)--A group of investors including the sovereign wealth funds of China, Singapore and Abu Dhabi have agreed to pay $1.8 billion for an 18.65% stake in Brazilian investment bank BTG Pactual, the bank said Monday in a statement.