Brazilian Real Posts Weekly Decline on European Debt Concern

Brazil’s real posted its first five- day decline in three weeks on concern Europe’s sovereign-debt crisis is undermining the global economic recovery and as a report showed Brazil’s consumer confidence dropped.

The currency weakened 0.1 percent to 2.0266 per U.S. dollar today, pushing the weekly decline to 0.6 percent. Swap rates on contracts due in January 2014 closed unchanged at 7.96 percent and rose 10 basis points since July 27.

The real fell today as two officials said European Central Bank President Mario Draghi may await a German ruling on the legality of Europe’s permanent bailout fund before announcing details of his plan to buy government bonds. The officials spoke on condition of anonymity because the deliberations aren’t public.

“The market’s recent improvements have been due to Draghi’s promises to act, but he hasn’t done anything yet,” Alfredo Barbutti, an economist at Liquidez DTVM Ltda., said by phone from Sao Paulo. “That’s the market’s big doubt.”

Brazil’s Finance Ministry said the government has been successful in weakening the real as other countries try to gain market share by devaluing their currencies.

“The Brazilian government is facing the so-called currency war with great success,” the ministry said today in a report posted on its website.

The central bank auctioned reverse currency swaps on Aug. 21 for the first time since March as the real strengthened toward 2 per dollar.

Brazil’s consumer confidence index fell to 120.4 in August, down from 121.6 in July, the Getulio Vargas Foundation in Rio de Janeiro reported today.

To contact the reporters on this story: Josue Leonel in em São Paulo at jleonel@bloomberg.net; Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net

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

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