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

· 02/05/2021 16:40
Funds raise bets against Brazil real by biggest margin since September, CFTC data show

By Jamie McGeever

- Funds and speculators on U.S. futures markets increased their bearish bets against the Brazilian real for a fourth week in a row, and by the most since last September, data showed on Friday.

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

The latest Commodity Futures Trading Commission data on Friday showed that funds increased their net short position by 6,119 contracts to 14,449 contracts in the week to Feb. 2, the biggest net short in two months.

The weekly change was the biggest increase in net shorts since the week to Sept. 8 last year, and is the first time since June that funds have added to their net short position for four consecutive weeks.

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

After plunging 30% against the dollar last year, many analysts expected the real to rebound strongly at the start of this year, especially with punchy inflation pushing the central bank closer towards its first interest rate hike since 2015.

But a devastating second wave of the COVID-19 virus, slowing growth and possible economic contraction in the first quarter, and high unemployment are piling pressure on the government to extend emergency cash transfers to the poor.

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

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

($1 = 5.37 reais)

Brazil real positioninghttps://tmsnrt.rs/3pOgaNH

(Reporting by Jamie McGeever
Editing by Sonya Hepinstall)

((jamie.mcgeever@thomsonreuters.com; +55 (0)11 97189 3169; Reuters Messaging: jamie.mcgeever.reuters.com@reuters.net))