Brazil Real Falls for Second Day on Renewed Concern Levy Leaving

  • Currency is the worst performer among 31 tenders this year
  • President Rousseff struggles to win support for measures

Brazil’s real declined for a second day as President Dilma Rousseff’s government struggled to win support for measures to shore up the nation’s finances amid speculation Finance Minister Joaquim Levy could leave his post.

The currency dropped less than 0.1 percent to 3.9088 per dollar at 12:41 p.m. in Sao Paulo, and was the most volatile among 31 major tenders tracked by Bloomberg. Rousseff’s aides are said to see former minister Antonio Palocci Filho as a candidate for finance minister if Levy leaves the position, according to a report in Valor Economico newspaper that didn’t say how it got the information.

The real has tumbled 32 percent this year, the most among major currencies, amid speculation Levy could leave as his proposed measures have faced opposition by member’s of Rousseff’s Workers Party and by lawmakers in Congress. Rousseff should change economic policies to boosting loans granted by public banks, and Levy should leave if he disagrees, Rui Falcao, president of Rousseff’s Workers’ Party, told newspaper Folha de S.Paulo in an interview on Oct. 18.

"Brazil is struggling to tighten the belt," said Ipek Ozkardeskaya, an analyst at London Capital Group. "Friction within Rousseff’s team could be the last nail in the coffin and further corrode the bridge toward a healthier budget."

Rousseff, who says the spending cuts and tax increases are needed to restore fiscal health, has been weakened by calls for her impeachment on allegations she wrongly accounted for government finances in 2014 and 2015. Brazil’s Lower House president said Monday that he’s still analyzing requests to remove her from office, while adding that a bill to encourage the repatriation of overseas assets, which could boost government revenue, may be discussed Wednesday.

Swap rates on the contract maturing in January 2017, a gauge of expectations on Brazil’s interest-rate moves, declined 0.01 percentage point to 15.31 percent.

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