SAO PAULO: The Brazilian real firmed on Wednesday hours before the country's Senate was expected to vote to remove President Dilma Rousseff from office and ratify Vice President Michel Temer as her successor.
The real rose as much as 0.6 percent to 3.2214 per dollar but later pared gains to 3.2345 to the greenback. The currency has jumped more than 20 percent this year on hopes that Temer will manage to curb rising debt and regain the trust of the business sector.
Many investors blame the interventionist policies pursued by Rousseff's Workers' Party during 13 years in government for dragging Latin America's biggest economy into its deepest recession in decades.
Brazil's economy shrank for a sixth straight quarter between April and June, but investments grew for the first time since 2013 and fueled hopes of a modest recovery.
Temer took over as interim president after Rousseff's suspension from office in May on charges of doctoring budget figures. The Senate trial is expected to culminate with a verdict to convict her on Wednesday.
Temer has so far run into difficulties gathering support for painful austerity measures in Congress, but many expect him to toughen up after he is confirmed as president.
"From now on, (Brazilian asset) prices will only continue to improve if there's a clear fiscal adjustment that starts as soon as possible," said Arnaldo Curvello, head of asset management at the brokerage Ativa.
Analysts with MB Associados consultancy believe Rousseff's removal from office could trigger inflows that lift the real to 3.00 per dollar.
On Wednesday, the real outperformed most Latin American peers, which were nearly flat after the US private sector added more jobs than expected, bolstering expectations of a rate hike as soon as next month.
Comments by US Federal Reserve policymakers including Chair Janet Yellen strengthened bets that US interest rates could rise sooner rather than later but also kept investors guessing over the specific timing of an increase.
Traders will look for additional clues over the Fed's policy following the US government's release on Friday of the closely watched payrolls report.
Higher interest rates in the United States could dull the allure of higher-yielding, riskier investments in emerging markets.
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