Brazilian Optimism Is Driving Dollar Down

The Brazilian real, Brazil's currency, had its biggest weekly gain in almost two months on optimism the worst of the global recession is over. The real climbed 3.6% last  week, the most since the period ended May 22, rising 0.3% to 1.9261 per US dollar on Friday. So far this year the real has strengthened 20%.

Retail sales in Brazil also rose more than analysts expected in May, reinforcing speculation that consumer demand is driving the rebound in Latin America's biggest economy. Sales rose 4 in May from the same month a year earlier, compared with a revised 7.1% gain in April, according to the national statistics agency IBGE

Meanwhile Brazil's international reserves rose to a record yesterday as the Central Bank steps up its purchases of dollars to curb the appreciation of the Brazilian currency.

International reserves climbed to US$ 209.576 billion on July 16, compared with the previous high of 209.386 billion set last year, on October 6. Reserves have climbed 5% from this year's low of 199.337 billion at the end of February.

The Brazilian Central Bank is expected to lower the benchmark interest rate 0.5 percentage points to 8.75% at the next meeting July 21-22, according to the median forecast in a July 10 central bank survey of about 100 economists published July 13.

They forecast the bank will then leave the benchmark rate unchanged this year before raising it to 9.25% by the end of 2010, the survey showed.

Mercopress