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Funds raise bets against Brazil real by biggest margin since September, CFTC data show

Jamie McGeever
·2 min read

By Jamie McGeever

BRASILIA, Feb 5 (Reuters) - Funds and speculators on U.S.futures markets increased their bearish bets against theBrazilian real for a fourth week in a row, and by the most sincelast September, data showed on Friday.

While the currency registered a weekly gain on the dollar ofaround 1.5% this week, that was more down to the prospect ofheavy U.S. fiscal stimulus pushing the greenback lower.Sentiment towards Brazil's real remains fragile.

The latest Commodity Futures Trading Commission data onFriday showed that funds increased their net short position by6,119 contracts to 14,449 contracts in the week to Feb. 2, thebiggest net short in two months.

The weekly change was the biggest increase in net shortssince the week to Sept. 8 last year, and is the first time sinceJune that funds have added to their net short position for fourconsecutive weeks.

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, slowinggrowth and possible economic contraction in the first quarter,and high unemployment are piling pressure on the government toextend emergency cash transfers to the poor.

This, in turn, is intensifying investor fears over thefiscal outlook, while some analysts doubt the central bank willbe able to follow through with a series of inflation-bustingrate hikes while growth remains weak.

The real is down more than 3% this year, among the top 10worst-performing currencies against the dollar so far in 2021,according to Refinitiv data.

($1 = 5.37 reais)

(Reporting by Jamie McGeeverEditing by Sonya Hepinstall)