The Brazilian real has fallen to a record low against the dollar, prompting concerns about the country's fiscal health. Investors are demanding stronger action from the government and central bank to address rising spending and debt levels.
Brazil ’s currency rout will continue to escalate unless the country’s central bank steps up its emergency measures and Luiz Inácio Lula da Silva’s government delivers fiscal reforms , investors and analysts have warned. The Brazil ian real has fallen by about 1 per cent this week alone, touching a record low of 6.21 against the dollar on Tuesday despite a barrage of foreign exchange interventions by the country’s central bank.
The Banco Central do Brasil (BCB) sold more than $3bn in back-to-back operations on Tuesday, its third consecutive day of wading into currency markets as policymakers seek to prop up the embattled real. The central bank has sold nearly $6bn this week, according to Financial Times calculations based on BCB disclosures. Those aggressive dollar sales staved off heavier selling in the real, which finished the São Paulo trading day on Tuesday at 6.11 against the US currency. But investors argued that stronger actions were needed to ease anxieties about the public finances of Latin America’s largest economy. The sell-off is compounding a delicate moment for the leftwing Lula administration, which is attempting to push through cost savings after its tax-and-spend policies provoked mounting resistance in the business world. “The market is very concerned regarding fiscal accounts and especially the government’s response to it,” said Eduardo Cohn, portfolio manager at Heritage Capital Partners in São Paulo. “The only way the market has to call the attention of the government is through the .” While emerging market currencies have broadly struggled since Donald Trump’s US election win last month, investors said much of the real’s woes stemmed from worries about rising government spending and debt levels under Lula. The stimulus measures have been a boon to growth but have also contributed to higher levels of inflation and prompted questions about fiscal sustainability
Brazil Real Currency Fiscal Reforms Economic Crisis
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