Dealers count cost of Santander's Brazilian real hedges

Real pain

Andre Hubner

Dealers in Brazil's foreign exchange markets were caught between a rock and a hard place in September. The rock: Brazilian authorities’ determination to arrest the appreciation of the real, which had been driven steadily higher by carry-trade investors drawn to Brazil’s double-digit interest rates. The hard place: a mammoth hedging programme designed to protect one European bank’s Brazilian operations from a slide in the real. The hedging activity accounts for anywhere from