Brazilian Real Climbs as China Manufacturing Spurs Global Growth Optimism

Brazil’s real advanced for a second day as signs of increased manufacturing output in China and Europe spurred optimism about global growth and fueled demand for higher-yielding assets.

The real strengthened 0.5 percent to 1.7378 per U.S. dollar at 11:26 a.m. in Sao Paulo, from 1.7468 yesterday. Yields on the interest-rate futures contract due in January 2014, the most actively traded today in Sao Paulo, rose three basis points, or 0.03 percentage point, to 10.01 percent.

Manufacturing in China, Brazil’s largest trading partner, rose last month as the world’s second-biggest economy withstood weaker exports driven by the European debt crisis. A gauge of manufacturing in the euro area beat estimates in January while a report may show that U.S. factory output grew at a faster pace last month. The data fueled bets of increased demand for Brazilian exports such as iron ore and sugar, said Felipe Brandao, emerging-markets strategist at Icap do Brasil CTVM.

“The market is being influenced by the positive impact of international equities and a more optimistic climate because of this data in Europe and China,” Brandao said in a telephone interview from Sao Paulo. “This data is driving stocks this morning and benefiting risk assets.”

Signs of economic resilience in China also pushed up yields on interest-rate futures contracts as traders bet stronger demand for commodities could fuel inflation, Brandao said.

“Any little sign of activity in China pushes up commodities and this can be bad for the rates market,” he said.