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2018.06.2913:09:00UTC+00BRAZIL: DI Rates Close Higher With USD, Inflation Target, Thin Volume

The one-day interbank deposit futures rates (DI rates) in Brazil ended higher Wednesday, tracking the steady advance of the locally traded U.S. dollar, amid thinner trading volume due to Brazil's national team match in the World Cup. The change in the inflation target for 2021 also contributed to the recomposition of premiums.

"The movement [in the curve] was more linked to the U.S. dollar and overflowed, affecting interest rates," said a senior derivatives trader at a national brokerage firm. A fixed-income trader said that the behavior of the greenback was linked to the foreign scenario.

He added that the thinner liquidity since early afternoon, because of the Brazilian national football match in Russia, also helped in the local business movement.

In addition, the market was skeptical about the reduction of 2021's inflation target to 3.75%, against a target of 4.00% for 2020.

"Although the assessment is that the move is in the right direction, there are still many doubts about the next government's economic policy," said Coinvalores chief analyst Sandra Peres. For Infinity Asset economist Jason Vieira, the situation is that the low inflation scenario has not yet been "tested" in a context of a really heated activity.

The January 2019 DI contract rate was at 6.970%, from 6.925% in the previous settlement, while the January 2020 DI rate ended at 8.55%, from 8.41%. The January 2021 DI contract rate was at 9.55%, from 9.39%.

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