Brazilian Real Drops as China Import Decline Damps Flow Prospect

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Brazil’s real fell the most in two weeks as a decrease in China’s imports damped the prospect of flows from the Latin American nation’s biggest trading partner.

The currency slid for a third straight day, losing 1.5 percent to 3.1213 per dollar at the close of trade in Sao Paulo. The drop was the biggest on a closing basis since March 27.

The real led a decline among commodity currencies including the Australian dollar and South African rand after China’s report. While Brazilians took to the streets Sunday to protest the corruption scandal at the state-controlled oil company and government austerity measures, the turnout was smaller than for demonstrations held last month.

“The trigger for the real’s decline versus the dollar was the heavy drop in Chinese imports and exports, which is extra confirmation that the Chinese economy is slowing,” Ipek Ozkardeskaya, an analyst at London Capital Group, said by e-mail.

China’s imports decreased 12.3 percent in March from a year earlier, leaving a trade surplus of 18.16 billion yuan ($2.9 billion). Exports fell 14.6 percent, compared with the median forecast of economists surveyed by Bloomberg, which called for a 8.2 percent increase.

The real was still up 2.4 percent this month, the most among 16 major currencies tracked by Bloomberg, after party leaders in Brazil’s ruling coalition agreed to support the government’s plan to trim deficits.

Inflation Outlook

Economists surveyed by Brazil’s central bank cut their 2015 inflation outlook for the first time this year, lowering it to 8.13 percent, according to the median of about 100 estimates published Monday. They maintained their forecast for a 1.01 percent economic contraction.

Swap rates on the contract maturing in January 2017, a gauge of expectations for changes in Brazil’s borrowing costs, increased 0.05 percentage point to 13.07 percent.

The central extended the maturity of currency swap contracts worth $509.8 million. Brazil halted at the end of March the sale of the swaps, which supported the real and limited import price increases.

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