Brazil’s Real Leads Major Currency Drops as Petrobras Downgraded

Brazil’s real fell the most among major currencies as a downgrade of Petroleo Brasileiro SA amid a corruption probe added to speculation that President Dilma Rousseff will struggle to restore investor confidence.

The real dropped for a third straight day, declining 1.7 percent to 2.6494 per dollar at 9:56 a.m. in Sao Paulo in the biggest decrease since Nov. 6. The currency pared its gain in January to 0.4 percent.

Moody’s Investors Service said Thursday it lowered all of its ratings on state-controlled Petrobras in another setback for the company at the center of the nation’s biggest-ever corruption scandal. Shares of the oil producer tumbled for a third straight day as it signaled a potential dividend cut.

“The ongoing Petrobras crisis is souring investors’ appetite for Brazilian assets,” Joao Paulo de Gracia Correa, a trader at Correparti Corretora de Cambio in Curitiba, Brazil, said by telephone. “There is the fear that a reduction in Petrobras’s dividends may threaten the fiscal goal.”

Moody’s reduced the company’s senior unsecured debt by one notch to Baa3, the lowest level of investment grade, citing concern over the corruption investigation as well as liquidity pressure that might result from delays in delivering audited financial statements.

Swap rates, a gauge of expectations for changes in borrowing costs, rose 0.06 percentage point to 12.73 percent on the contract maturing in January 2016 and were down 0.23 percentage point since the end of December.

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