High interest rates in Brazil spur the world’s best carry trade -largest quarterly rise in the real since 2009
RIO DE JANEIRO, BRAZIL – The Brazilian real’s rally is gaining momentum as rising prices for Brazilian commodity exports and one of the world’s highest interest rates fuel a lucrative carry trade.
High interest rates and the best performance of commodity prices in 30 years have given the Brazilian currency a strong start to the year.
The carry trade – a deal in which investors borrow dollars and buy local bonds in countries that pay higher interest rates – has yielded 24% since late December, the highest in the world and more than double the yield of the second-ranked country.
This is a dramatic turnaround for a currency that has depreciated against the dollar over the past five years, depreciating 40% during that period as the economy stagnated and foreign investment dried up.
Now, with analysts talking of a more favorable political outlook and rising demand for oil, soybeans, and iron ore from Brazil driving exports to record highs, the real is extending its biggest quarterly gain since 2009.
The gains in Brazil offer a respite for global investors who have seen losses in most other markets this year, from U.S. stocks to government bonds and corporate credit.
“Where else can the money go?” said Danny Fang, a strategist at BBVA in New York. The bank was among the most accurate forecasters for the real in the first quarter, according to a Bloomberg ranking.
The Brazilian currency has risen 21% this year to its strongest level against the dollar in two years, at R$4.6, due to the central bank’s aggressive tightening to fight inflation.
With information from Bloomberg
Live Market IntelligenceBrazil — Live Market Board
Rio Times · Live Market Intelligence
Brazil — Live Market Board
+0.21%
174,951.12
+0.21%
66,644.91
+0.53%
11,369.64
-0.71%
3,044,628
+1.18%
2,507.12
-0.05%
60,449.35
+0.64%
| Instrument | Last | Change | YoY | Prev. | High | Low | Volume |
|---|---|---|---|---|---|---|---|
| IBOV | 174,951.12 | +0.21% | +21.85% | 174,576.80 | 168,310 | 167,142 | — |
| USD/BRL | 5.16 | +0.01% | -5.13% | 5.16 | 5.18 | 5.14 | — |
| SELIC | 14.00% | — | — | — | — | — | |
| PETR4 | 41.64 | -0.05% | +35.19% | 41.66 | 41.97 | 41.15 | 41,499,400 |
| VALE3 | 72.97 | +0.83% | +30.75% | 72.37 | 73.54 | 72.66 | 17,658,000 |
| ITUB4 | 38.60 | -1.03% | +4.57% | 39.00 | 39.34 | 38.39 | 29,487,800 |
| BBDC4 | 16.85 | +0.36% | +3.50% | 16.79 | 16.90 | 16.67 | 19,416,900 |
| BBAS3 | 19.37 | +0.47% | +0.73% | 19.28 | 19.44 | 19.16 | 11,069,200 |
| B3SA3 | 14.26 | -0.21% | +12.73% | 14.29 | 14.47 | 14.11 | 33,037,800 |
| ABEV3 | 14.89 | -0.80% | +21.91% | 15.01 | 15.07 | 14.81 | 16,453,100 |
| WEGE3 | 47.59 | +0.49% | +29.99% | 47.36 | 48.08 | 47.36 | 3,364,600 |
| PRIO3 | 59.14 | -0.19% | +50.67% | 59.25 | 59.81 | 58.74 | 3,325,600 |
| SUZB3 | 41.33 | +2.35% | -23.55% | 40.38 | 41.48 | 40.35 | 3,914,900 |
| RENT3 | 34.68 | -0.09% | +0.84% | 34.71 | 34.96 | 34.35 | 7,979,100 |
| AZZA3 | 15.89 | -2.63% | -53.76% | 16.32 | 16.42 | 15.82 | 1,330,300 |
| CSNA3 | 4.30 | +0.47% | -42.65% | 4.28 | 4.41 | 4.26 | 10,076,100 |
| GGBR4 | 24.69 | +2.19% | +51.38% | 24.16 | 24.85 | 24.18 | 7,047,600 |
| ENEV3 | 24.21 | -1.38% | +70.49% | 24.55 | 24.64 | 23.99 | 9,297,000 |
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