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Financial News: BRAZIL: DI Rates Open Higher Impacted By USD

BRAZIL: DI Rates Open Higher Impacted By USD And Domestic Scenario

06/06/2018 - 15:59:00 (RTTNews)

(RTTNews) - The one-day interbank deposit futures rates (DI rates) in Brazil opened higher, with the domestic financial market keeping the tension of the previous session, prompting the National Treasury to extend the extraordinary repurchase auctions of National Treasury Notes - Series F (NTN-F) until Friday. The rally in the locally traded U.S. dollar, which hit R$ 3.85 intraday before receding, set the tone of the recomposition in premiums of the forward curve.

Mirae Asset's chief operating officer Pablo Spyer said that the behavior of the future rates market shows "a sum of investors' frustrations."

"The discomfort with the fiscal developments that the truck drivers' strike will cause, the lack of expectation of approving major reforms and a quick and unpredictable election," he said.

He also points to the process of monetary normalization by the United States Federal Reserve Bank. "The Fed is reducing its balance sheet and this is a slow and strong move, but it raises the U.S. dollar against all the currencies in the world, patiently."

According to a derivatives trader, the market remains alert to any new announcement of intervention by the Brazilian Central Bank, although much of the stress on the opening of the foreign exchange market has been given amid thin trading volume. "The dollar went up in a vacuum," he noted.

Despite the extraordinary repurchase auctions promoted by the Treasury to fight market volatility, the interest rate curve remains under pressure, with the opening of rates leading the market to price more than 70% odds of an increase in the basic interest rate as of this month's meeting.

Near the middle of the session, the January 2019 DI contract rate was at 6.97%, from 6.90% in the previous session, while the January 2020 DI rate rose to 8.03%, from 7.89%. The January 2021 DI contract rate was at 9.23%, from 9.05%.

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