Brazil’s Real Drops to Nine-Year Low as Petrobras Delays Report

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Brazil’s real fell to a nine-year low as Petroleo Brasileiro SA delayed its earnings report as federal police investigated allegations of corruption and money laundering at the state-run oil producer.

The currency fell 0.5 percent to 2.6016 per dollar at the close of trade in Sao Paulo, the weakest level on a closing basis since April 2005. The drop was the biggest among 16 major currencies tracked by Bloomberg. The real is down 1.7 percent since Nov. 7.

The Brazilian currency sank with shares of Petrobras as the company said it may adjust financial statements and internal controls before publishing results. The real pared its decline after the central bank supported the currency by saying it would extend the maturity on as many as 14,000 foreign-exchange swap contracts Nov. 17, compared with 9,000 today.

“Many foreign investors -- and even Brazilians who have money abroad -- are selling Petrobras’s stock and converting reais into dollars, which puts pressure on the local currency,” Mario Battistel, a foreign-exchange trader at Fair Corretora, said in a telephone interview from Sao Paulo.

Petrobras said yesterday in a regulatory filing that it expects to release unaudited third-quarter results Dec. 12. Audited earnings will be disclosed “as soon as possible,” and the company plans to announce a publication date at least 15 days in advance. President Dilma Rousseff was Petrobras’s chairwoman from 2003 to 2010.

The real also fell as a smaller-than-forecast increase in retail sales added to concern that the economic team Rousseff is preparing to appoint will struggle to restore growth.

Finance Post

A replacement for the departing Finance Minister Guido Mantega will face the challenge of curbing above-target inflation and restoring growth to Latin America’s biggest economy, which entered a recession in the first half of the year. Rousseff hasn’t yet formally offered the post to anyone, Valor Economico reported, citing people it didn’t identify. The president has said she will make a nomination after the Group of 20 summit Nov. 15-16 in Brisbane, Australia.

Swap rates, a gauge of expectations for changes in borrowing costs, declined 0.14 percentage point to 12.73 percent today on the contract maturing in January 2017. They are still up 0.08 percentage point this week.

Borrowing Costs

The central bank, acting to curb above-target inflation, unexpectedly raised the benchmark lending rate by a quarter-percentage point to 11.25 percent three days after Rousseff won re-election Oct. 26.

Standard & Poor’s reduced the nation’s credit rating in March to the lowest level of investment grade, citing slower growth as well as deteriorating fiscal accounts.

Brazil may fall to junk in two to three years, according to Jefferies Group LLC. “It will be difficult to maintain the investment-grade rating even under the best-case scenario,” Siobhan Morden, the head of Latin America strategy at Jefferies, wrote in a research report to clients.

Brazil’s retail sales climbed 0.5 percent in September from a year earlier, the national statistics agency reported. The median forecast of economists surveyed by Bloomberg was for a 0.7 percent increase.

To support the real, Brazil sold the equivalent of $197.4 million of foreign-exchange swaps today as part of an intervention program begun last year and rolled over contracts worth $437.1 million.

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