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Financial News: BRAZIL: DI Rates End Sharply Higher With USD

BRAZIL: DI Rates End Sharply Higher With USD And Higher Rate Limits

06/07/2018 - 18:14:00 (RTTNews)

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil ended sharply higher. The intense movement in the forward curve, stimulated by the locally traded U.S. dollar's rise, led the B3 stock exchange to set new limits on DI increases twice during the session.

During the session, the Brazilian Central Bank contacted the financial institutions' trading desks in order to find out about the need for liquidity in the financial market and the consultation ended up calming the tension seen in domestic businesses since early morning.

"Apparently the Central Bank consultation proved that the move was more speculation," said a senior derivatives trader at a national brokerage firm.

For a director at a national brokerage firm, the market was stressed after seeing an extremist, and not a center-right candidate with a reformist bias, ahead in Brazil's electoral polls, with real chances of winning October's election.

"There, they began the movement to remove the position and put it alltogether. They remembered that they will not have reforms and realized the discomfort that the [truckers'] strike should cause in fiscal, economic growth and inflation," he said.

According to Rafael Passos, an analyst at Guide Investimentos, the market, in a generalized way, prices this environment of local uncertainties. "But the big picture is the Fed's interest rate hike," the director added, recalling that the Federal Reserve has its meeting next week and the global market expects clues about total increases in the U.S. interest rate this year.

The January 2019 DI contract rate was at 7.585%, from 6.975% at the previous session and 8.815% in the new limit set by B3, while the January 2020 DI rate ended at 8.84%, from 8.06% and 9.39% on the same comparison. The January 2021 DI contract rate was at 9.79%, from 9.23% and 10.74%, respectively.

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