Brazilian Real Drops From One-Month High as Retail Sales Plunge

Brazil’s real fell from a one-month high after a March plunge in retail sales added to concern that Latin America’s biggest economy is stalling.

The real dropped 0.8 percent to 2.2196 per U.S. dollar at close of trade in Sao Paulo after rising yesterday to 2.2023, the strongest level since April 9. The decline was the biggest since May 5. Swap rates on contracts maturing in January 2017 increased four basis points, or 0.04 percentage point, to 12.08 percent.

The national statistics agency reported today that retail sales slid 1.1 percent in March from a year earlier, the biggest decline in a decade. While economists raised their 2014 median growth forecast to 1.69 percent in a central bank survey published May 12, the projected pace is still slower than last year’s 2.28 percent expansion.

“The economy seems to be slowing from what is already a very low base,” Eduardo Suarez, a Latin America foreign-exchange strategist at Bank of Nova Scotia, said in a telephone interview from Toronto.

Brazil sold $198.3 million of foreign-exchange swaps today under a program announced in December to support the currency and limit import price increases. The central bank also rolled over contracts that were due June 2 and worth $247 million.

Finance Minister Guido Mantega said yesterday in congressional testimony that the Brazilian currency is back to normal after recovering losses and that “no one talks about turbulence now.”

The real has climbed 6.4 percent this year, rallying partly on speculation President Dilma Rousseff will face a runoff in the October election after overseeing faltering growth.

Economists in the central bank survey forecast that consumer prices will rise 6.39 percent this year, down from a median estimate of 6.50 percent a week earlier, the upper limit of the central bank’s target range.

To contact the reporter on this story: Blake Schmidt in Sao Paulo at bschmidt16@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Rita Nazareth

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