Brazil Real Leads World Losses on Speculation Levy to Be Ousted

Updated on
  • Valor Economico reported Rousseff agreed to replace minister
  • Official says president resisting pressure from politicians

Brazil’s real led world losses after a newspaper said that President Dilma Rousseff has been persuaded to replace Finance Minister Joaquim Levy. A government official denied the report.

The wire service of Valor Economico newspaper reported that Rousseff has not yet decided on a replacement for Levy, and there is no set date for his exit. Later, a government official with knowledge of the discussions said the president doesn’t plan to remove Levy and hasn’t been persuaded to appoint former central bank chief Henrique Meirelles to the top economic job.

Brazil’s real advanced earlier this week amid speculation that Meirelles could replace Levy, fueling optimism he could conjure the political support needed to pass austerity measures. Brazilian media has reported several times in recent months that Levy is on his way out as the government struggles to gain Congress approval for measures to shore up the budget and avoid further credit-rating downgrades.

“Markets are very confused at the moment," said Paulo Petrassi, a fixed-income trading manager at Leme Investimentos in Florianopolis. "Amid this anxiety, we see the currency tumbling.”

The real slumped 2 percent to 3.8494 per dollar Friday in Sao Paulo, the most among 16 major currencies tracked by Bloomberg. The real had fallen 2.1 percent since Friday, the first weekly slide in a month.

Brazil’s real has plunged 31 percent this year, the most in the world, as Latin America’s largest economy heads toward the longest contraction since the 1930s amid accelerating inflation and a widening graft scandal. Rousseff’s record disapproval rating has heightened lawmaker opposition to belt-tightening measures such as tax increases and spending reductions. As a result, the nation’s credit rating suffered four downgrades since 2014, including a cut to junk by Standard & Poor’s this September.

Deteriorating growth outlooks in Asia and Europe and weaker-than-forecast American retail sales also helped spur a slide in the real. Emerging-market currencies slumped amid concern U.S. growth remains uneven as policy makers consider raising interest rates as soon as next month, dimming the allure of riskier assets. In China, Brazil’s top trading partner, the broadest measure of new credit tumbled.

"The dollar is stronger against a series of emerging-market currencies," Joao Paulo de Gracia Correa, a foreign-exchange manager at SLW Corretora de Valores, said from Curitiba. “In Brazil, with so much uncertainty on the fiscal and political fronts, there is pressure for the real to decline further.”

Swap rates on the contract maturing in January 2017, a gauge of expectations on Brazil’s interest-rate moves, rose 0.04 percentage point to 15.58 percent.