Brazil’s currency closed on Monday at the weakest level ever against the dollar as raging economic and political situations increased uncertainty and the odds of the country losing its investment-grade credit rating from yet another ratings company, which could be catastrophic.
Brazil’s economy is forecast to contract this year, and Standard & Poor’s recently cut its rating for the country’s sovereign debt to junk status because of the government’s inability to get its finances under control. Moody’s and Fitch still give Brazil investment-grade ratings, but analysts say it is just a matter of time before either or both of those firms also downgrade Brazil.
The shrinking economy and a giant corruption scandal at state-controlled oil company Petrobras have pushed President Dilma Rousseff’s approval ratings below 8% and prompted calls for her impeachment, while also making it almost impossible for her to get austerity measures passed by an increasingly rebellious Congress.
The Real has been the second-worst performing currency against the dollar over the past 12 months, losing close to 70% of its value. The Real exited active trading at 3.9791 to the dollar on Monday, after reaching 3.9966 to the dollar earlier in the session.
The Brazilian central bank has recently stepped up its interventions to prop up the currency. It continues to roll over dollar swap contracts, which give businesses protection against the weakening Real.
On Monday the bank held two more auctions of dollar repurchase agreements, which help support the Brazilian currency by temporarily injecting more dollars into the local forex market. It was the third time in recent weeks the bank has held such auctions.
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Still has further to go.Sep 22nd, 2015 - 08:33 am 0
This recession hasn't bottomed out yet.
The dollar is like Icarus of legend.Sep 22nd, 2015 - 09:50 am 0
@ 1 SkipSep 22nd, 2015 - 11:19 am 0
@ 2 Brasso
No you idiot, it's the Real that is burning in flames of incompetence and graft by The Chief Crook, Lula, and his now, none favourite, DumbAss Dilma.