Real Declines to Three-Year Low as Mantega Says Slump Is Normal

Brazil’s real dropped to a three- year low as Finance Minister Guido Mantega said the currency was on a “normal trajectory,” encouraging speculation that the central bank will let it stay weak.

The currency depreciated 0.3 percent to 2.1045 per dollar at the close in Sao Paulo, the weakest level since May 2009. The real was the biggest loser today among the 16 most-traded currencies tracked by Bloomberg. Swap rates on the contract due in January 2015 dropped one basis point, or 0.01 percentage point, to 8.03 percent.

“Mantega’s comments could still make room for the dollar to gain again,” Luciano Rostagno, the chief strategist at Banco WestLB do Brasil SA in Sao Paulo, said in a telephone interview.

Policy makers are prepared to intervene in the foreign- exchange market at the beginning of next year to improve liquidity if necessary, central bank President Alexandre Tombini said at a congressional hearing in Brasilia today. Brazil has no set band for the currency, he added.

The central bank has sold reverse currency swaps since August to keep the real weaker than 2 per dollar and bolster exports. 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.

‘Selfish’ Policies

Brazil will keep doing whatever is necessary to stop “selfish” monetary policies of some developed nations from hurting its economy by driving up the real, Mantega said at an International Monetary Fund meeting in Tokyo last month.

The real has lost 3.5 percent this month as European debt turmoil and U.S. budget wrangling boost demand for a refuge in the dollar.

The central bank stepped in to curb the real’s losses by auctioning currency swaps in May and June as European sovereign- debt turmoil drove it to what was then a three-year low. A strong U.S. currency hurts Brazilian companies whose expenses are mostly in dollars.

President Dilma Rousseff told Sao Paulo-based newspaper Valor Economico on Nov. 20 that the real is “overvalued.”

Consumer prices rose 0.54 percent in the month through mid- November after a prior 0.65 percent increase, the national statistics agency reported today. The median forecast of analysts surveyed by Bloomberg was for 0.51 percent advance. Annual inflation accelerated to 5.64 percent from 5.56 percent, above the central bank’s target of 4.5 percent.

Brazil’s unemployment rate fell to 5.3 percent in October from 5.4 percent in the previous month, matching the median projection of economists surveyed by Bloomberg.

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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