Halister News

(Bloomberg) -- Size of Brazil’s FX reverse swaps auction may be affected by Yellen’s speech today, Luiz Eduardo Portella, treasurer at Modal Asset Management, says in a phone interview

• Should Yellen come with a hawkish message, leading to pressure on BRL, Brazil’s central bank could cut current auction volume of 10,000 contracts, which would have a negative impact, pushing the currency down further
  • If Yellen remains dovish, despite other Fed officials speeches signaling hikes, BRL could resume the previous strengthening trend, opening room for BCB to increase the volume of the daily auctions
• NOTE: BCB cut swaps on Aug. 19 to avoid extra weight on BRL
• Expected Temer comments after likely Rousseff impeachment next week may influence expectations on reforms, Portella says
  • After becoming effective president, Temer should assume a stronger attitude in favor of fiscal reforms and privatizations, Portella says
• NOTE: “Regarding the floating exchange rate regime, we have affirmed that the central bank, when it judges necessary and without damaging the regime’s basic premises, will use the exchange rate tools that it has with parsimony,” BCB’s Ilan Goldfajn said on Aug. 12