Brazil real drops on concern Rousseff will lower budget target

Paula Sambo – Bloomberg Business, 7/13/2015

Brazil’s real fell from a one-week high as speculation that political tension will force President Dilma Rousseff’s administration to compromise on the budget cast doubt on her commitment to preserve the nation’s credit rating.

The currency extended its drop in July to 2.1 percent as lawmakers pushed back against her move to narrow government deficits. Concern mounted after the Brazilian newspapers Estado and Folha de S. Paulo reported that Rousseff will discuss a reduction in the fiscal target at a meeting Monday.

“While Rousseff’s effort to solidify the fiscal base is positive, the course of discussions and political barriers may trigger short-term volatility in the financial markets,” Ipek Ozkardeskaya, an analyst at London Capital Group, said in an e-mailed response to questions.

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