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Brazil’s currency, the real, on Tuesday sank to a new record low against the US dollar as investor worries persisted about the government’s ability to rein in creeping public spending.
Around halfway through the trading day, the greenback was fetching an unprecedented 6.20 reais, before falling back somewhat, according to the site TradingView.
The Brazilian currency has lost around a quarter of its value over this year, compared to the dollar, which has regularly traded above the psychological threshold of six reais since late November.
Investors are concerned about the fiscal discipline of leftwing President Luiz Inacio Lula da Silva’s government in Latin America’s biggest economy.
Budget adjustments the government announced last month, which included tax cuts for the middle class alongside around $11 billion in spending reductions, exacerbated the jitters.
Stubbornly high inflation prompted Brazil’s central bank last week to lift its key rate to 12.25 percent.
It was the third consecutive hike by the bank, which warned it may well raise the Selic rate further in its next two meetings.
However Brazil’s economy is growing strongly, forecast to expand more than three percent this year, and unemployment is at its lowest level in 12 years.
“The only thing not going right in this country is that the interest rate is above 12 percent,” Lula told TV Globo in an interview on Sunday, upon leaving hospital following emergency surgery to stop intracranial bleeding linked to a bad fall he had in October.
Lula is opposed to high interest rates, fearing they will make credit more expensive, both for companies looking to invest and also for consumers willing to spend.
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Publish date : 2024-12-17 08:05:00
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