MercoPress. South Atlantic News Agency

Brazil's Real remains at record low: overstretched budget and another interest rate cut next week

The Real has shed nearly 36% this year, making it one of the worst performing emerging market currencies

Brazil's Real eyed a fresh record low on Thursday, while other Latin American currencies were muted as markets mulled over increasingly dire economic readings due to the coronavirus.

The Real was slightly off a new record low of 5.4687 to the dollar touched earlier in the day, as worries mounted over how Latin America's largest economy would handle the pandemic.

The Brazilian government faces the challenge providing stimulus without blowing up the country's budget deficit.

“Speculation is rampant that the central bank might even cut its key rate by 75 basis points in early May, which is putting pressure on the Real,” wrote Antje Praefcke, FX and EM analyst at Commerzbank.

“The government signaled a recovery plan for the economy, but national finances remain overstretched, making the real one of the hardest hit currencies during the crisis... That is unlikely to change significantly short term.”

The Real has shed nearly 36% this year, making it one of the worst performing emerging market currencies.

A continued, albeit slowing jump in U.S. jobless claims, coupled with data showing business activity plummeting in the U.S. and euro zone spurred further risk aversion, pointing to further losses in emerging markets.

The readings offset optimism over stimulus measures across a number of developed and developing markets, as governments race to stymie the economic impact of the coronavirus.