Brazil’s real fell to a five-month low in an emerging-market selloff as economists reduced their currency forecast and the trade deficit widened to a record.
The real depreciated 1.1 percent to 2.4403 per dollar at the close in Sao Paulo, the weakest level since Aug. 21. A Bloomberg customized index tracking 20 emerging-market currencies fell 0.4 percent today to the lowest since 2009 after declining 3 percent last month. The Bloomberg-JPMorgan Latin America Currency Index of the region’s most-traded currencies, slid 1 percent today to a decade low.
Brazil’s currency will fall to 2.47 per dollar by the end of the year, according to the median of about 100 estimates in a central bank survey of economists published today, compared with the forecast of 2.45 a week ago. Brazil posted a trade deficit of $4.06 billion in January, the biggest on record.
“There is a very high stress regarding emerging markets,” Solange Srour, the chief economist at ARX Investimentos, said in a phone interview from in Rio de Janeiro. “The depreciation of the real should continue and the tendency is to have it between 2.50 and 2.60 by year-end.”
The real dropped 2.1 percent in January on concern Brazil’s fiscal deterioration will lead to a lower credit rating and amid speculation that the tapering of Federal Reserve stimulus will erode demand for emerging-market assets.
India, South Africa and Turkey raised borrowing costs last week to support their currencies and curb inflation as the Fed announced a further reduction in a program of bond purchases that had supported developing-market assets.
“We remain exposed to negative international news that could affect the currency,” Reginaldo Galhardo, foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a phone interview.
To support the real and limit increases in import prices, Brazil sold $197 million of foreign-exchange swaps today under daily auctions announced Dec. 18.
The government’s budget deficit grew in December to 3.3 percent of gross domestic product, compared with 3.4 percent in October, the widest in four years.
Swap rates on the contract maturing in January 2015 rose for sixth straight day, climbing four basis points, or 0.04 percentage point, to 11.73 percent, the highest since August 2011, on concern policy makers will maintain the pace of increases in borrowing costs to curb inflation.
Central bank President Alexandre Tombini said last week that the nation is combating inflation in the context of a falling real. Policy makers lifted the target lending rate by 50 basis points on Jan. 15 for a sixth consecutive time, increasing it to 10.50 percent.