By Jamie McGeever
BRASILIA (Reuters) - Brazil's real surged on Friday through 5.00 per dollar for the first time since March, sealing its biggest weekly rise in nearly 12 years after surprisingly strong U.S. employment data sparked a buying spree in riskier, beaten down assets.
The real, long the pariah on international foreign exchanges and one of the worst performing currencies this year, rose 7% against the dollar this week, its strongest performance since October 2008 and one of the biggest weekly gains on record.
(GRAPHIC: Brazil real - spot: https://fingfx.thomsonreuters.com/gfx/mkt/rlgpdkqwmvo/BRLSPOT.png)
(GRAPHIC: Brazil real - weekly change: https://fingfx.thomsonreuters.com/gfx/mkt/oakpeqjgkpr/BRLWEEKLY.png)
The real closed up 3% on Friday, hitting an intraday high of 4.9340 per dollar (BRBY) as traders who have been short the currency scrambled to cover their positions and cut their mounting losses as the rebound gathered pace.
The improving global picture, greater investor appetite for risk and a calmer domestic political scene boosted the real's upswing. It has now rebounded more than 20% from its record low near 6.00 per dollar in mid-May.
"The real may trade better than peers in an emerging-market friendly environment, considering heavy dollar long positions," Citi strategists wrote in a note on Friday.
"People are short emerging market FX, and within emerging markets they are underweight the real," one hedge fund manager in Sao Paulo said.
Figures on Friday showed that the U.S. economy unexpectedly added jobs in May after suffering record losses in April, a sign that the downturn triggered by the coronavirus pandemic may be over.
This sparked a widespread rally across equity, credit and emerging markets, and a sell-off in safe-haven U.S. Treasury bonds.
Meanwhile, Commodity Futures Trading Commission data on Friday showed that funds and speculators increased their net short Brazilian real position slightly to 12,003 contracts in the latest week, the largest net short position in two months.
But that is about a quarter of the size of the short position held in early March, indicating that positioning is still fairly light.