MercoPress. South Atlantic News Agency

Brazil concerned with the appreciation of its currency against the US dollar

The current appreciation of the Brazilian currency, Real, is a “cause for concern,” but also reflect international investors' growing interest in the nation's assets, Finance Minister Guido Mantega said on Friday.

“The appreciation of the exchange rate results from investors' enthusiasm about Brazil because the country offers more stable, secure conditions” Mantega told reporters.

But he also admitted ”the (currency) gains harm the productive sector, exporters and farming. In fact it is a cause for concern,“ he added.

The US dollar dropped to 2.02 Reais in Brazilian money markets on Friday, having lost 4% during the week.

Mantega's comments mirror those of Central Bank President Henrique Meirelles on Thursday warning against ”excessive euphoria“ in currency markets. The bank has bought dollars in the spot foreign exchange market every session since May 8 in a bid to soak up a flood of greenbacks to Brazil and ease the Real appreciation.

The currency has gained 15% since the beginning of the year and surged more than 20% since reaching a three-month low in early March.

Asked how the government could limit gains in Brazil's currency, Mantega said the central bank was already buying dollars and increasing international reserves ”which, by the way, is one of the reasons why we are solid.“

Mantega anticipated Brazil's economy would grow between 3% and 4% in the fourth quarter of this year, recovering after a deep slump in the first months of the year.

The central bank has signalled it will continue to lower domestic interest rates, a step that is in ”the right direction,“ he added.

”The conditions are there for the economy to grow after a tumble in the last quarter of last year,“ Mantega said. ”The recovery is under way, with a slower rebound in the second half that will gain steam toward the end of the year.”