Bloomberg News

Brazil Real Falls to Three-Month Low on S&P Greek Debt Warning

March 29, 2012

Brazil’s real fell to the lowest level in almost three months as Standard & Poor’s warning that Greece may have to restructure its debt again intensified global growth concern, deepening losses caused by government measures to curb gains in the currency.

The real fell 0.5 percent to 1.8348 per U.S. dollar at 12:13 p.m. in Sao Paulo, and earlier touched 1.8379, the weakest level since Jan. 9. It has gained 1.7 percent this quarter. Yields on the interest-rate futures contract due in January 2013 fell two basis points, or 0.02 percentage point, to 8.89 percent

The real, the worst-performer among 16 major currencies tracked by Bloomberg this month, declined after S&P’s comments raised concerns the global economic recovery may falter. That added to the real’s losses after the government expanded taxes on foreign borrowing this month and stepped up intervention to weaken the currency and protect exporters, said Marcelo Fonseca, an economist with M.Safra & Co.

“Today there’s more concern with Europe, the scenario in China is still very uncertain -- the real’s behavior is in line with peers,” Fonseca said by phone from Sao Paulo.

A Greek debt restructuring may involve bailout partners such as the International Monetary Fund, Moritz Kraemer, head of sovereign ratings at S&P, said at an event in London.

Chinese stocks fell today, dragging the benchmark index to its lowest level in more than 10 weeks, on concern the slowing economy is spurring earnings shortfalls.

Growth Forecast

Brazil’s central bank said today it expects gross domestic product to expand 3.5 percent in 2012, following a 2.7 percent expansion last year and 7.5 percent in 2010. Brazil will miss its inflation target next year even if policy makers resume interest rate increases after cutting borrowing costs to a near record low, the bank said in its quarterly inflation report.

Policy makers said inflation will slow to within the 4.5 percent target by year’s end, and then quicken to 5.3 percent in 2013, should the central bank fulfill economists’ forecast for it to cut the benchmark rate to 9 percent this year and raise it to 10 percent in 2013.

“If the central bank errs in its inflation projection of 4.4 percent for 2012, inflation in 2013 would be closer to 6 percent than 5 percent,” Luiz Eduardo Portella, a fund manager at Modal Asset Management, said by phone from Rio de Janeiro. “The central bank emphasized that the confidence of businesses and consumers is improving and this could make economic activity heat up.”

To contact the reporters on this story: Josue Leonel in Sao Paulo at jleonel@bloomberg.net; Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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