Brazil’s real extended its biggest monthly rally since 2003 after the central bank sold one-sixth of the contracts auctioned to protect against a decline, indicating traders are betting the currency will appreciate.
The real rose to a seven-month high as the central bank sold 2,900 out of 17,000 foreign-exchange reverse-swap contracts offered on Thursday. Auctioning the securities is equivalent to buying dollars in the futures market. The real also climbed after policy makers said they see no room for cutting borrowing costs as inflation will remain above its 2017 target. Along with the Brazilian currency, most of its major counterparts climbed against the dollar on Thursday amid speculation that the Federal Reserve will be cautious when raising interest rates.
The real rose 1.2 percent to 3.5617 at 11:30 a.m. in Sao Paulo, extending its March rally to 13 percent. One-month implied volatility, a gauge of traders’ expectations for swings in the currency was the highest among 16 major currencies tracked by Bloomberg. Swap rates on contracts due January 2017 advanced 0.07 percentage point to 13.82 percent.
Brazil Energy Insight 
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