It was almost a clean sweep for the US Doller on Monday with only 3 out of 117 currencies strengthening. Out of the 114 weakening currencies, there were several notable moves. The Uruguayan Peso, the Polish Zloty and the Brazilian Real all softened by more than 3%. Here's the top 10:
We're going to focus on the Real for today's post since it has previously come up as the topic of our Major Market Move post a couple of times this year and also because we track Brazilian sovereign bonds. Looking at the bonds, we see that despite the currency move over the last three months, the yields have actually improved slightly:
And here's the Real over the same time frame:
The Brazilian central bank continues to try to control the decline, with mixed results according to
this article from the WSJ:
The real weakened past the BRL2.03 mark in a swift reversal during
mid-morning trade, luring the central bank from the sidelines with a
dollar-swap auction. But the auction was far from a success, with the
central bank selling $400 million worth of the $1 billion dollar-swap
contracts it was prepared to sell. The real initially gained some ground
against the dollar before falling back once again and weakening past
the BRL2.04 mark.
The market did not like the terms set by the Brazilian central bank
in the auction, Mr. Zotovici said. "The bank is going to need to lower
the price of the dollar in its swaps if it wants to continue
intervening," he said.
Dollar-swap auctions allow investors to exchange paper linked to
domestic interest rates for contracts indexed to the U.S. dollar. The
auctions are a tool to smooth volatility in the exchange market at times
when the Brazilian real is weakening sharply against the dollar. Last
week, the central bank sold a total of $2.02 billion in dollar swaps in
two separate auctions.
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