Brazil’s real led global declines as foreign investors withdrew dollars in early May amid concern that Latin America’s largest economy is contracting and government budget deficits are widening.
The real depreciated 0.7 percent to 3.0395 per dollar in Sao Paulo after earlier climbing 1.2 percent. The drop was the biggest among 31 major currencies tracked by Bloomberg as the central bank reported a net outflow of $2.56 billion for May 1-8 after a $13.11 billion inflow in April.
Finance Minister Joaquim Levy tried to reassure investors when he said at an event in London that ensuring fiscal stability is the government’s priority. Lower house President Eduardo Cunha told reporters that voting on a measure limiting pensions for surviving relatives starts Wednesday.
“As markets await the fiscal adjustment measures, negative data such as the outflow keep piling in,” Joao Paulo de Gracia Correa, a trader at Correparti Corretora de Cambio in Curitiba, Brazil, said in an e-mailed response to questions. “The overall picture is not pretty at all.”
Latin America’s biggest economy will shrink 1.2 percent this year, which would be the biggest contraction since at least the early 1990s, according to the median of estimates from economists surveyed by the central bank.
Brazil posted a primary budget deficit, excluding interest payments, of 0.7 percent of gross domestic product in March after Levy pledged a 1.2 percent surplus by year-end.
Swap rates on the contract maturing in January 2017, a gauge of expected changes in Brazil’s borrowing costs, declined 0.03 percentage point to 13.53 percent Wednesday.