Brazil Real Trades Weaker Than 2 Per U.S. Dollar for Third DayGabrielle Coppola and Josue Leonel
Brazil’s real traded weaker than 2 per dollar for a third day on speculation the central bank won’t intervene to strengthen the currency after analysts lowered their forecasts for economic growth.
The currency slid 0.2 percent to 2.0128 per U.S. dollar, the weakest closing level since Jan. 25. Swap rates on the contract due in January 2015 fell one basis point, or 0.01 percentage point, to 8.51 percent.
“The government seems to think that a dollar around 2 is positive for the economy without harming inflation,” Flavio Serrano, a senior economist at Banco Espirito Santo de Investimento SA, said by telephone from Sao Paulo.
The real weakened to 2 per dollar on March 21 on speculation government intervention in Latin America’s largest economy to spur flagging growth is prompting investors to withdraw money from the country. The real last crossed the level in January, when the central bank stepped in to strengthen the currency as inflation accelerated. Central bank President Alexandre Tombini said last week that policy makers were ready to intervene to avoid excessive volatility.
Gross domestic product will expand 3 percent this year, according to the median forecast of about 100 analysts in the central bank’s Focus survey published today. That is down from a previous projection of 3.03 percent. The economy grew 0.9 percent in 2012.
Swap rates fell on the lowered growth forecasts and as the Getulio Vargas Foundation reported that its consumer confidence index fell in March to 113.9 from 116.2 in the prior month.
“The economy is not going,” Andre Perfeito, the chief economist at Gradual Investimentos, said by phone from Sao Paulo. “Consumer confidence fell and the Focus survey was softer, with a lower growth and inflation forecast for 2013.”
Economists in the central bank survey cut their outlook for inflation this year to 5.71 percent from 5.73 percent in the previous week while raising their call for next year to 5.60 percent from 5.54 percent.
They increased their forecast for the target lending rate at year-end to 8.50 percent from 8.25 percent in the previous week. The so-called Selic will be 8.50 percent at the close of 2014, the survey indicated.
Minutes of the central bank’s March 5-6 meeting showed that an increase in the target lending rate from a record low 7.25 percent wasn’t imminent as policy makers said “a cautious management of monetary policy” was needed. The monetary policy committee will next meet April 16-17 and May 28-29.
Brazil’s inflation is under control and won’t hinder the country’s growth, Finance Minister Guido Mantega said in Brasilia last week.
The central bank has swung between selling currency swaps to prevent the real from falling too quickly and offering reverse currency swaps to protect exporters by preventing excessive gains. The real closed at a 10-month high of 1.9442 per dollar on March 8 before the central bank intervened on March 11 to weaken it.