Brazil focused on real-denominated yield curve

* Brazil to add liquidity to dollar-denominated benchmarks
* Aims to consolidate long-end of interest-rate curve

Brazil's Foreign Reserves Surpass $300 Bln For First Time Ever - WSJ.com

"BRASILIA (Dow Jones)--Brazil's foreign reserves surpassed the $300 billion mark for the first time ever Wednesday according the country's central bank, seeing influence from recent heavy foreign exchange inflows and accelerated dollar buying by the institution.

Pragmatism draws Brazil closer to US | beyondbrics | FT.com

A flood of manufactured imports from China has pushed Brazil into the same camp as the US in the global currency war, pitting it against its biggest trading partner. The move signals a broader swing towards pragmatism under Dilma Rousseff, Brazil’s new president. But as Jonathan Wheatley of beyondbrics argues, Brazil also needs to address long-standing problems that undermine business competitiveness.
see video below:

Pragmatism draws Brazil closer to US | beyondbrics | News and views on emerging markets from the Financial Times – FT.com

February 8, 2011 4:28 pm by beyondbrics

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.