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Brazil Real Falls for Fifth Day on Bets Intervention Stems Flows

Brazil’s real dropped for a fifth day, the longest stretch of losses since August, on bets central bank intervention to weaken the currency is diminishing the flow of funds into Latin America’s largest economy.

The real depreciated 0.4 percent to 2.0584 per U.S. dollar at the close in Sao Paulo, the weakest level since June 28. Swap rates on the contract due in January 2015 rose four basis points, or 0.04 percentage point, to 7.97 percent.

Brazil’s currency was the worst performer among major currencies tracked by Bloomberg after the South African rand before tomorrow’s report from the central bank on currency flows. The real also fell as disagreement on a target for Greek debt reduction stoked concern that Europe’s debt crisis will slow global growth.

“Flows are much weaker than usual,” Joao Medeiros, the head of currency trading at Pioneer Corretora in Sao Paulo, said in a phone interview. “The mess in Europe continues.”

Brazil’s central bank has sold reverse currency swaps to keep the real weaker than 2 per dollar to support exporters. It sold $1.4 billion of contracts Oct. 25, $1.6 billion Oct. 23, $1.3 billion Oct. 5, $5.7 billion Sept. 12 through Sept. 17 and $350 million Aug. 21. The August reverse swaps were the first since March.

The real fell on demand for a refuge as International Monetary Fund Managing Director Christine Lagarde disagreed with the decision of euro-area finance chiefs to push back by two years until 2022 the goal of reducing Greece’s debt to a “sustainable” level.

‘Negative Day’

“Today is a negative day abroad,” said Andre Perfeito, the chief economist at Gradual Investimentos in Sao Paulo.

Swap rates fluctuated as European debt concern offset a report showing Brazil’s retail sales rose for a fourth month.

Retail sales climbed 0.3 percent in September from the prior month, the national statistics agency reported today. The median forecast of economists surveyed by Bloomberg was for an increase of 0.2 percent.

Broad retail sales, including construction materials and autos, advanced 2 percent in September from a year earlier, the slowest annual pace since October 2011.

To contact the reporters on this story: Gabrielle Coppola in Sao Paulo at gcoppola@bloomberg.net; Josue Leonel in Sao Paulo at jleonel@bloomberg.net

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

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