The Brazil real tumbled after the central bank hinted it won’t do much to boost the currency, while analysts projected a steep decline in Latin America’s biggest economy this year.
The real plunged 1.4 percent to trade at 2.8808 per dollar as of 12:29 p.m. Sao Paulo time, making it the worst performing currency out of 31 key currencies monitored by Bloomberg. The currency recorded a 5.6 percent drop in February, the sixth consecutive monthly decline.
Brazil’s policy makers said last week that they won’t roll over a portion of the $9.96 billion worth of currency swaps that are due in April 1, removing a key support for the currency. The real has lost 22 percent of its value in the last six months over fears of credit downgrade due to fiscal weakness and stagnant economic growth.
“The indication that the rollovers will be lower this month fuels concern among investors on how the central bank aims to continue with the program,” Camila Abdelmalack, a Sao Paulo-based economist at CM Capital Markets, told Bloomberg News. “And that concern combines with already bleak prospects for the economy.”
Brazil placed currency swaps worth $98.3 million on sale and rolled over contracts valued at $359.2 million as it seeks to buttress the real. A central bank survey of economists estimates the economy to contract 0.58 percent, up from the previous forecast of a 0.5 percent decline. The economists also raised their inflation estimate to 7.47 percent, compared with the upper ceiling of the official forecast of 6.5 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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