Filipe Pacheco – Bloomberg Business, 11/9/2015
The Brazilian real slumped as economists in a central bank survey said the recession is worsening, while a disappointing trade report out of China shows it’s unlikely the Asian nation can help fuel a rebound anytime soon.
The real dropped 0.7 percent to 3.7937 per dollar as of 10:44 a.m. in Sao Paulo. The currency is down 30 percent this year, making it the worst performer among 31 major counterparts to the dollar tracked by Bloomberg.
Economists now forecast Brazil’s economy will shrink 3.1 percent this year and 1.9 percent next year, deeper than the 3.05 percent and 1.51 percent contractions they had estimated a week ago, according to the central bank survey published Monday. Adding to Brazil’s economic woes, Chinese overseas shipments declined 6.9 percent in October in dollar terms, the customs administration said, a bigger decline than estimated by all 31 economists in a Bloomberg survey. China is Brazil’s biggest trading partner.
Kenneth Rapoza – Forbes, 11/8/2015
Anything can happen in a free market. But what will become of the weakest currency in the big four emerging markets if the Fed hikes rates next month? Will it to go R$5.00 as some uber-bears are now forecasting?
Brazil’s benchmark consumer price index, the IPCA, rose to 9.9% from a year earlier in October, up from a steady 9.5% in August and September. This is happening in a recession and with interest rates unchanged at 14.25%. Moreover, the currency has actually strengthened by around half a percent over the last month. In monthly terms, Brazil’s inflation index rose a non-seasonally adjusted 0.82% in October, over 10% now in annualized terms, all because of higher domestic food prices and transportation costs. Pass-through of the weaker real was the key driver of inflation, raising the local price of fuel and food, an energy-intensive product. The real is down 26.7% against the dollar over the last six months and has only began to flex its muscles in the last few weeks.
The real’s stabilization since mid-September could help to cool inflation in 2016 if sustained, says Bill Adams, senior international economist with PNC Financial in Pittsburgh.
Paulo Trevisani – The Wall Street Journal, 10/23/2015
Commercial and financial dealings with other countries have become a rare positive sign for Brazil’s troubled economy, with the current-account deficit expected to fall sharply this year.
The central bank said Friday that the current-account deficit shrank to $3.1 billion in September, from $7.9 billion a year earlier. The bank estimates 2015 will end with a $65 billion deficit, a 37% drop from last year’s $103.6 billion deficit.
The improvement stems from the sharp depreciation in the country’s currency this year, combined with a deep recession. The Brazilian real has lost about a third of its value in 2015, and economists expect gross domestic product to shrink 3% this year.
Katie Martin – Financial Times, 10/4/2015
Brazil’s currency, the real, is tormenting many fund managers. Few thought it would see out the year unscathed. The country’s high interest rates were never likely to be enough entirely to shield the currency from trading weakness at a time when the economy was shrinking and the US is on the cusp of raising interest rates.
But the real has contrived to stand out particularly among a field of emerging markets currencies almost all of which have suffered bruising declines.
The pace and scale of the fall in the Brazilian currency, once a popular pick as one of emerging markets’ juiciest bets, have stumped even the most seasoned observer and left some investors peeking at their screens through their fingers. “Mayhem” is how Rabobank described it; the source of “one of the wildest days we’ve ever seen in Latin American markets”.
Jeffrey T. Lewis – The Wall Street Journal, 9/24/2015
The Brazilian real strengthened against the dollar on Thursday, the first time in six sessions, after the president of the central bank said he is willing to use the country’s foreign reserves to defend the currency.
The real ended active trading at 4.0438 to the dollar, according to Tullett Prebon via FactSet, after closing at 4.1325 on Wednesday. Trading was volatile during the day, with the real hitting 4.2447 to the dollar in the morning, its weakest level since it was launched in 1994.
The real has been dropping against the dollar in recent days, pulled down by political turmoil and the country’s economic troubles.
Reese Ewing – Reuters, 7/24/2015
Brazil’s real fell on Friday to its weakest against the dollar in 12 years, slipping quickly in early trade to 3.334 to the dollar.
The slide in the local currency comes after Brazilian Finance Minister Joaquim Levy announced on Wednesday the government would slash its primary surplus target due to deteriorating tax revenues amid Brazil’s deepening economic slump.
Denyse Godoy, Paula Sambo, and Filipe Pacheco – Bloomberg Business, 7/21/2015
Brazilian shares dropped to an almost four-month low on speculation borrowing costs at Latin America’s largest economy will increase further, curbing prospects for equities. The real advanced for the first time in four days.
The Ibovespa extended this month’s slump after central bank director Tony Volpon said policy makers should keep raising interest rates until the outlook for inflation reaches the government’s target. The benchmark stock gauge has tumbled 11 percent from this year’s peak on concern the decision to boost the Selic to a six-year high to tame consumer prices will deepen an economic contraction.
“The central bank will probably increase rates again next week in a trend that’s damaging the economy and prospects for companies,” Pedro Paulo Silveira, the chief economist at brokerage TOV Corretora, said by phone from Sao Paulo.