Brazilian ETF And Currency Fight Inflation

The Brazilian real strengthened on speculation that the central bank’s efforts to shore up the currency will help offset investor aversion to higher-yielding assets, giving the currency’s exchange traded fund (ETF) some vigor.

The Central Bank of Brazil sold 16,750 currency swaps out of 30,000 contracts put on auction yesterday. The bank also bought $1.25 billion worth of reals with an agreement to resell the currency at a future date, report Adriana Brasileiro and Jamie McGee for Bloomberg.

The WisdomTree Dreyfus Brazilian Real (BZF) is down 20.9% since its May 22 inception, but rose 5.2% in trading yesterday.

Brazil’s fastest run of economic expansion in a decade may be over, as commodity prices, local currency and stocks fall, report Andre Soliani and Telma Marotto for Bloomberg. Inflation remains a threat to the currency, but the interest rate increases have been halted, posing a bigger threat.

iShares MSCI Brazil (EWZ) is down 58.3% year-to-date.

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