Brazil Stocks, Real Fall Most in World on New Political Turmoil

  • Lender Itau shares tumbles after police search office
  • Real drops the most among major currencies on fresh concerns

Brazil’s real lost its title as the world’s best performing currency of 2016 after tumbling Thursday along with stocks as the same political undercurrents that derailed the administration of President Michel Temer’s predecessor now haunt his team.

The real plunged 2.3 percent, the most among 150 currencies tracked by Bloomberg, to 3.4645 per dollar Thursday on concern that economic reforms may be thwarted by political discord. The Ibovespa stock index’s 3.9 percent drop was also the world’s biggest.

Brazilian assets are taking a beating as investors get spooked by under-the-radar proposals that the lower house included in anti-corruption measures late Wednesday. The task force behind the sweeping graft investigation known as Carwash threatened to resign if the bill is signed into law, fueling concern the changes would be a setback in efforts to crack down on unethical behavior by government officials and lead to social unrest in Latin America’s biggest economy.

"This chaotic year just won’t end, it’s one bombshell after another," said Italo Abucater, the head of foreign-exchange trading at Icap Brasil. "These political tensions and protests are souring the mood."

Lender Itau Unibanco Holdings SA, Brazil’s largest bank, was among the biggest losers on the Ibovespa index after police searched the company’s offices as part of a tax probe focused on a bank it acquired a decade ago.

Itau fell 4.6 percent. Banco Bradesco SA was the second-largest drag on the index as it declined 5.6 percent.

Even after today’s drop, the Ibovespa remains the world’s best performing stock index this year. That comes even as corporate profit margins remain off the highs seen several years ago and as the economy continues to be mired in the worst recession in a century.

Swap rates on the contract maturing in January 2018, a gauge of expectations for interest-rate moves, rose 0.2 percentage point to 12.26 percent.

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