Brazil’s real headed for its first back-to-back gain in three weeks as the state-controlled oil company said it would raise fuel prices, signaling that policy makers may need to lift interest rates further to combat inflation.
One-month implied volatility was the highest in emerging markets as the currency advanced 1.9 percent to 3.985 per dollar at 10:36 a.m. in Sao Paulo. The real , which reached a record low last week, joined a rally in emerging-market currencies as a surge in Chinese shares and a gain in commodity prices helped spur appetite for riskier assets.
Petroleo Brasileiro SA raised prices for gasoline and diesel for the first time in almost a year to help offset the impact of lower oil prices and the weaker real, which has plummeted 22 percent this quarter, the most among major currencies. The move will probably add to inflation already running at about twice the official target, which could prompt policy makers to raise borrowing costs in a bid to mute consumer-price increases even as the country heads to its longest recession since the 1930s.
Brazil Energy Insight 
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