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Funds on longest streak betting against Brazil real in almost a year, CFTC data show

Jamie McGeever
·1 min read

By Jamie McGeever

BRASILIA, Feb 12 (Reuters) - Funds and speculators on U.S.futures markets increased their bearish bets against theBrazilian real for a fifth week in a row, the longeststreak in almost a year, data showed on Friday.

The latest Commodity Futures Trading Commission data onFriday showed that funds increased their net short position by2,917 contracts to 17,366 contracts in the week to Feb. 9, thebiggest net short in two months.

To go short a financial asset is to effectively bet that itwill decline in value.

After plunging 30% against the dollar last year, manyanalysts expected the real to rebound strongly at the start ofthis year, especially with punchy inflation pushing the centralbank closer towards its first interest rate hike since 2015.

But a devastating second wave of the COVID-19 virus,possible economic contraction in the first quarter, and highunemployment have forced the government to move towardsextending emergency cash transfers to the poor.

This is intensifying investor fears over the fiscal outlookand weighing on the currency, canceling out the upward pressureon the real from expectations the central bank will soon begintightening monetary policy.

Central Bank President Roberto Campos Neto said this weekthe high levels of currency volatility and risk premiums inBrazil are in large part due to the worrisome fiscal outlook.

The real is down 3.5% this year, among the top 10worst-performing currencies against the dollar so far in 2021,according to Refinitiv data.

($1 = 5.3750 reais)

(Reporting by Jamie McGeeverEditing by Marguerita Choy)