Brazil’s currency isn’t at a satisfactory level, Finance Minister Guido Mantega said, even after the real fell more than any major currency this year.
“The exchange rate is at a reasonable level, still not entirely satisfactory,” Mantega said at an event held by the National Industry Confederation in Sao Paulo today.
The comments signaled that the government welcomes a further weakening of the real to protect local manufacturers, said Andre Perfeito, chief economist at Gradual Investimentos. The real has lost 10.5 percent against the U.S. dollar this year as President Dilma Rousseff said on Nov. 21 that the currency had been “overvalued.”
Brazil’s currency reversed losses that followed Mantega’s comments after the central bank auctioned currency swaps. The real appreciated 0.86 percent to 2.086 per U.S. dollar at 1:26 p.m. in Sao Paulo after touching 2.1172, the weakest intraday level since May 2009.
A weaker real is helping make Brazilian manufacturers more competitive against foreign rivals, central bank President Alexandre Tombini said in a congressional hearing yesterday.
“The presidency is comfortable with and even welcomes a weaker real,” Perfeito said by telephone from Sao Paulo. “For the Finance Ministry, the currency is a key price that hurts the foreign sector.”
Mantega said that the real would remain weak and that the economy would expand by at least 4 percent next year. “We have now had an exchange rate for four or five months of more than two reais per dollar, that shows it’s here to stay,” Mantega said today.
While the central bank does not target a specific value for the real, it stands ready to intervene in the currency market when necessary, Tombini said.