Brazil Real Falls to Four-Month Low as Intervention Scaled Back

Brazil’s real dropped to a level weaker than 2.4 per dollar for the first time in four months as the central bank began scaled-back support for the currency.

The real depreciated 1.1 percent to 2.3878 per dollar at the close in Sao Paulo after touching 2.4095. Swap rates on contracts maturing in January 2016 rose four basis points, or 0.04 percentage point, to 11.66 percent.

Brazil sold $199 million of currency swaps today under a program announced Dec. 18 to auction $200 million each trading day until at least June 30. The central bank offered $2 billion of swaps and $1 billion in dollar credit lines weekly in 2013 after the real touched a four-year low. Brazil was headed for a monthly net outflow of $7.1 billion in December, the biggest in data beginning in January 2010.

“The central bank’s intervention is now lighter and should have less of an impact on the market,” Marcelo Schmitt, the fixed-income director at Sulamerica Investimentos in Sao Paulo, said in a phone interview.

The real fell 13 percent in 2013 on concern that the country’s fiscal deterioration will lead to a reduced credit rating and on speculation that the tapering of Federal Reserve stimulus will sink demand for the nation’s assets. The drop in the currency is the biggest since the financial crisis in 2008.

Brazil posted today a trade surplus of $2.56 billion for 2013, the smallest since a deficit in 2000, as consumer demand boosted imports and slower global growth crimped sales abroad.

Annual inflation accelerated to 5.85 percent in the month through mid-December, more than a percentage point above the central bank’s 4.50 percent target, a report showed last month.

Brazil has lifted the benchmark lending rate by 2.75 percentage points since April to 10 percent, the biggest increase among 49 central banks.

The dollar gained today against most emerging-market currencies as a decrease in U.S. initial jobless claims added to speculation that the Fed will reduce stimulus programs that tend to weaken the greenback.

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