April 29, 2020 / 8:51 PM / a month ago

Brazil's real has biggest 2-day rally since January 2009

BRASILIA, April 29 (Reuters) - The Brazilian real jumped 3% on Wednesday, continuing its rebound from last week’s record low as an improving global backdrop and adjustment to domestic interest rate expectations pushed it onto it biggest two-day rally in over 11 years.

The real has appreciated around 5.5% in the last two trading sessions, the biggest two-day rise since January 2009 and the intensely volatile market conditions of the Great Financial Crisis.

This comes on the heels of its 7% slump last week, also the real’s biggest weekly decline since the Great Financial Crisis and November 2008.

“Some of the market’s excesses are being corrected,” said Cleber Alessie Machado, broker at Commcor DTVM in Sao Paulo, noting the dollar/real’s fall of around 40 centavos in recent days.

“The (dollar’s) move up toward 6.00 (reais) on expectations of a super dovish central bank seemed more speculative than rooted in fundamentals. That’s not to say it won’t test 6.00 again, but right now it isn’t justified,” he said.

The real closed on Wednesday at 5.3552 per dollar.

Traders noted strengthening risk appetite across global markets as Wall Street moved high on rising hopes for an effective COVID-19 treatment, which obscured bleak U.S. GDP data and words of warning from Federal Reserve Chair Jerome Powell.

One senior trader in Sao Paulo said there is a growing sense among analysts that the Brazilian central bank’s widely expected rate cut next week will be accompanied by extremely cautious language surrounding any further easing.

“There’s an increasing chance of a hawkish approach like ‘50 (basis points) and done’,” he said, adding that this would help support the real.

Economy Minister Paulo Guedes said on Wednesday that the central bank could eventually lower the benchmark Selic rate to below 3% if the government commits to its reform agenda once the crisis is over and tighter fiscal policy paves the way for looser monetary policy.

Traders also noted that the real has been on an upward trajectory this week following the central bank’s aggressive intervention last Friday when it sold more than $3 billion, including $2.175 billion in the spot market.

Reporting by Jamie McGeever Editing by Marguerita Choy

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