Despite Record High Real Brazil Strides to New Record Foreign Trade Year

Brazil’s Real has little changed from its near three-year high on expectations of rising commodity prices and demand from abroad, which will help South America’s largest economy produce a record trade surplus.

Brazil’s trade surplus in the year to date is more than a third higher than last year’s record total on increased demand for commodities such as sugar, iron ore, soybeans and coffee from expanding economies such as China.

Investors such as Flavio Farah now expect Brazil to post a third straight trade surplus, increasing receipts from abroad while the combination of deflation and interest rates at a 21-month high add to capital inflows to strengthen the Brazilian currency.

“We are working with a new peak in the appreciation of the real in the short-term,” said Farah, Treasury desk chief at WestLB in Sao Paulo, in an interview.

The real was little changed at 2.3397 per dollar from 2.3405 late Monday, boosting its 2005 gain to 14%, the best performance against the dollar of the 16 major currencies. Earlier, it rose as much as 0.6% to 2.3265, matching its strongest level of April 23, 2002.

The yield on Brazil’s benchmark bond that matures in 2040, the most-traded emerging market security, fell for a fourth day in five to 9.18%, lower by 5 basis points, or 0.05%, from 9.23% Monday according to JPMorgan Chase & Co. The price rose 0.65% on the dollar to 118.95.

This article appeared originally in Mercopress –


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