MercoPress. South Atlantic News Agency

Brazil's real sinks against US dollar to lowest rate in 10 years

Brazil's currency slips to 2.76 against 1 US dollar

The currency closed at R$ 2.76 per US$ 1 dollar. Domestic politics, international oil prices, US Fed measures and Russian ruble drop to blame.

 Brazil's real fell to its lowest in almost ten years on Tuesday, as the ups and downs of domestic politics render the central bank's currency-intervention program useless to regain investor confidence, and hit the R$ 2.76 per US$ 1 dollar mark.

The dollar is up 4.42 percent in December and 13.9 percent in the year. On March 29, 2005, the rate had closed at US$1 to R$2.702.

Also affecting the exchange scale on the international arena were a deep plunge by the Russian ruble, the United States' Federal Reserve (Fed) terminating its dollar injection plan in the world economy, driven by the local recovery in employment, and the steady drop of oil prices.

After the reelection of President Dilma Roussef, the Central Bank Monetary Policy Committee (COPOM) increased the Selic rate (basic interest rates) to 11.75 percent per year. Consistent with economic orthodoxy, this move was supposed to prop up the real, by widening the difference between Brazilian rates against those of the United States and consequently make Brazil more attractive to international investors. But so far it has not happened.

The Bovespa stock index opened on Tuesday more than 2 percent negative, but bounced back shortly after when shares of PetroBras pulled up from a six-day downtrend with the help of bargain hunters, despite oil price plunging worldwide.

With Brent crude falling below 60 dollars for the first time since July 2009, Russia said it would not reduce its oil output to help prop up prices, neither will it seek similar measures from OPEC countries.