Brazil’s currency, the real, surged to a three-year high against the US dollar after the Central Bank raised the basic Selic interest rate for the ninth straight month to 19,75% the highest since September 2003.
The rise of the benchmark rate attracts funds from abroad, but can also be a problem for Brazilian exporters who will receive less reais for the overseas US dollars.
The move was seen as a strong bid by the Central Bank to keep inflation in check and in line with an annual target between 5.5 and 8%.
“The trend is for the real to remain strong after the rise in interest rates boosted also by favourable conditions in the external scenario”, said Lucas Mendes, a São Paulo analyst.
So far this year, the real has appreciated 8,5% against the US dollar and traded Thursday at 2.45 to the greenback, which is the strongest since May 2002.
With the real holding strong, Brazilian companies are tempted to sell bonds abroad, which are also boosted by favorable acceptance in world money markets.
Mercopress – www.mercopress.com
