Brazil’s Real Drops as Trading Day Shortened by World Cup Match

Brazil’s currency fell, posting the biggest weekly slide in five months, as a U.S. holiday and a trading day shortened by the national team’s World Cup match contributed to low liquidity in the foreign-exchange market.

The real depreciated 0.1 percent to 2.2133 per dollar at the close of trade in Sao Paulo. It weakened 0.9 percent for the week, the largest decline since the five days ended Jan. 24. Swap rates on contracts maturing in January 2017 slipped 0.1 percent to 11.43 percent.

Derivative trading at local stock exchange BM&FBovespa ran through 3 p.m. Sao Paulo time due to a World Cup quarterfinal match between Brazil and Colombia. Foreign-exchange trading ran until 12 p.m. Volumes may have also been affected by Independence Day holiday in U.S.

“People are leaving the office earlier and there is basically no inflow of foreign money,” Silvio Campos Neto, an economist at Tendencias Consultoria Integrada in Sao Paulo, said in a telephone interview. “The real has been trading close to 2.20 per dollar, mostly due to daily central bank interventions. Medium-term, the real will tend to weaken.”

The currency will decline to 2.40 per dollar at the end of 2014, according to the median of 44 economist forecasts compiled by Bloomberg.

Inflation Range

The central bank said June 24 that it will keep offering $200 million in swaps each business day through at least year-end and provide additional dollars as needed to help support the real as part of its fight against above-target inflation. The program had been scheduled to end in June.

Central bank president Alexandre Tombini said July 1 that Brazil’s annual inflation will close the year within the official target range of 2.5 percent to 6.5 percent. Consumer prices in Brazil climbed 0.47 percent in the month through mid-June, the slowest pace since September, as food and beverage increases eased.

Finance Minister Guido Mantega extended tax cuts this week on cars to stimulate demand while the central bank held the target lending rate at 11 percent in May following nine consecutive increases.

The national statistics agency reported July 2 that industrial production dropped in May for a third straight month, declining 3.2 percent from a year earlier.

To contact the reporter on this story: Filipe Pacheco in Sao Paulo at fpacheco4@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Marie-France Han

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