Brazil’s real posted a weekly decline as President Dilma Rousseff faced a June 1 deadline to push budget savings through the Senate.
The real fell 0.1 percent to 2.9969 per dollar in Sao Paulo after rallying as much as 0.8 percent. It was down 0.7 percent since May 8, the most among 31 major currencies after the Colombian peso.
“There are a lot of potential drivers of a flare-up that sees real selling dominating,” Christian Lawrence, a trader at Rabobank in New York, said in an e-mailed response to questions. “It would only take a few negative headlines to push the pair north of 3.1.”
Rousseff’s effort to shore up finances and avoid a junk credit rating suffered a political disappointment this week when the lower house voted to raise spending on pensions several years from now. The nation is at risk of missing its budget goals, a Standard & Poor’s analyst said this week.
Finance Minister Joaquim Levy has pledged to convert last year’s primary budget deficit of 0.6 percent of gross domestic product into a surplus of 1.2 percent by year-end. Instead, the gap, which excludes interest payments, expanded to 0.7 percent of GDP in the 12 months through March.
Fiscal accounts are “a bit worse than we expected,” Roberto Sifon-Arevalo, a managing director at S&P, said this week in an interview at Bloomberg’s office in Sao Paulo.
The real was up for most of the day as a report showed U.S. consumer confidence unexpectedly fell in May by the most in more than two years, adding to bets that the Federal Reserve would hold its target lending rate near zero for most of 2015.
Swap rates on the contract maturing in January 2017, a gauge of expected changes in Brazil’s borrowing costs, declined 0.07 percentage point to 13.39 percent, extending the drop this week to 0.13 percentage point.
While Brazil halted at the end of March the sale of currency swaps supporting the real and limiting import price increases, the central bank is still doing rollovers, extending the maturity on contracts worth $393 million Friday.