Brazil Real Falls on Skepticism over Levy’s Ability to Revive Growth

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Brazil Real Falls on Skepticism over Levy's Ability to Revive GrowthThe Brazil’s real dropped from its highest level in one month on mounting skepticism over whether Finance Minister Joaquim Levy could revive growth in South America’s biggest economy.

The real fell 0.5 percent to trade at 2.6306 per U.S. dollar as of 2:57 p.m. Sao Paulo time, after touching its highest point since Dec. 9 on Wednesday. Swap rates, which measure expected changes in interest rates, fell 0.04 percentage point to steady at 12.62 percent for the contract that matures in January 2016.

Addressing the press in Brasilia on Tuesday, Levy hinted at plans to lower gross debt to less than 50 percent of the gross domestic product over the long run.

“While Levy’s comments were pleasing to the market, 2.60 is the ceiling,” Joao Paulo de Gracia Correa, a Curitiba, Brazil-based trader at Correparti Corretora de Cambio, told Bloomberg News. “A level stronger than that is an exaggeration because there is no concrete positive news, just promises.”

Though Brazil emerged from a recession in the third quarter, its economy is estimated to have expanded 0.2 percent in 2014, the weakest pace since 2009. On Dec. 29, the Brazilian government revealed it plans to reduce unemployment and pension benefits in a move expected to save 18 billion reais.

In order to boost the real and curb import price surges, the central bank offloaded $98 million worth of currency swaps on Thursday and rolled over contracts valued at $487.9 million. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com