The real is plummeting. Never before has the Brazilian currency been so weak against the US dollar since its creation in 1994. The Brazilian currency reached its weakest mark ever, R$ 6.3139 against the dollar on Wednesday (18).
Weighing even more on the real, the US Federal Reserve cut interest rates and signaled it will slow the pace of rate cuts, strengthening the dollar overall, next year.
The decline was so significant that it forced the Brazilian Central Bank to sell reserves to try to hold back the dollar’s appreciation.
The reason for the real’s devaluation is that investors are doubtful whether lawmakers will be able to pass the main part of a fiscal bill aimed at putting government finances on a more sustainable basis.
“Markets are primarily concerned about the overall fragile fiscal trajectory and the fact that it is affecting inflation expectations through pressure on the real,” said Thomas Haugaard, portfolio manager at Janus Henderson in Copenhagen.
“Often we have to see the market revolting before painful adjustments happen, but for now it doesn’t seem there will be a fiscal response to the recent turmoil.”
The Brazilian Congress approved the main text of a bill on Tuesday night (17), but still needs to vote on some amendments proposed by lawmakers, while Finance Minister Fernando Haddad said on Wednesday that the Senate is ready to vote on the bill as soon as the Chamber sends it.Tourism Dollar
At the end of the year, many Brazilians have trips planned. For those buying dollars to leave the country, the news is sad. But those living abroad who take advantage of the year-end holidays to visit Brazil are celebrating.
The tourism dollar, the exchange rate for travelers, showed a positive variation of 0.58% at the opening of business on Thursday (19). After 11:04 AM, there was a reversal of signals and the rate also began to operate in decline. At 3:35 PM, the currency was trading at R$ 6.392.
Source: Reuters and Uol