Dollar in Brazil Falls to Almost 7-Year Low

    US dollar falling face the Brazilian real

    US dollar falling face the Brazilian real Foreign investments in Brazilian stocks and bonds keep making Brazil's currency, the real, stronger while the dollar continues to fall. This Thursday, May 31, the American currency fell to its lowest value in over six years.

    The dollar retreated 0,82% closing at  1,926 reais the best show for the real since November 2000. In May alone, the US dollar fell 5.4% in relation to the Brazilian currency. The decline for 2007 has been 9.8%.

    Brazilian Finance Minister, Guido Mantega, gave journalists his own explanation for the dollar decline. According to him, among the contributing factors to the fall are interest by foreigners in Brazil and funds received by the multinational steel company Arcelor Mittal to pay dividends and stockholders. The company's press office wouldn't confirm, however, the information that they got a dollar infusion.

    Financial analysts say that a big chunk of the fresh dollars coming into Brazil is the result of foreign investor drawn by the country's high interest rates (12.5% for the Selic, the nation's benchmark interest rate) as well as Brazil's favorable economic scenario. The risk Brazil as calculated by JP Morgan Chase Bank is at 142 points on a down trend.

    As Mário Paiva, an exchange rate analyst for brokerage house Liquidez, explains, the purchase of dollars by Brazil's Central Bank (BC) is not enough to contain the excess of the American currency in the market: "It has become a snowball. The more the BC reinforces its reserves, the more the country gets closer to investment grade and more the Brazil risk falls and the dollar flow increases."
     
    It's expected that the low dollar will convince Brazil's Monetary Policy Committee (Copom) to reduce the Brazilian basic interest rate by 0.5% to 12% when they meet next week, on June 5 and 6. They might cut another 0.5% in their July 17 and 18 meeting.

    Tags:

    • Show Comments (0)

    Your email address will not be published. Required fields are marked *

    comment *

    • name *

    • email *

    • website *

    This site uses Akismet to reduce spam. Learn how your comment data is processed.

    Ads

    You May Also Like

    Lula Checkmates Bush

    Even the most orthodox international lending institutions have been checkmated by President-elect Luiz Inácio ...

    A big hole in Brazilian street

    Brazil Has Become a Land of Private Affluence and Public Penury

    Years ago, retired Brazilians who were poor began to count upon a rural pension ...

    New York City Center shopping mall in Rio, Brazil

    Brazil: Lack of Tourists Makes Rio’s Shops Sing the Blues This Carnaval

    The Brazilian airports' crisis, which reduced the number of domestic tourists in Brazil, is ...

    President Lula and Celso Amorim from Brazil

    Brazil Is in Doha, Qatar, for UN Conference on Financing for Development

    Brazil will be participating in the Follow-up International Conference on Financing for Development to ...

    Brazil’s Lula Has Converted the State into a Business Counter, Says Opposition

    Representatives of the PSDB (Party of the Brazilian Social Democracy) in the Chamber of ...

    Delaware state, USA

    Brazil Declares Delaware a Tax Haven. Nevada and Wyoming Might Be Next

    On June 23, 2008, Brazil’s Congress published Law 11,727/2008, which, effective as of January ...

    Brazil Teaches Nigeria How to Add Alcohol to Its Fuel

    Brazil’s state-run oil giant, Petrobras, is going to provide technical and commercial support for ...

    Brazil’s Ruling PT Party Won’t Field House Speaker Candidate

    Brazilian Deputy Aldo Rebelo, from the Partido Comunista do Brasil (PC do B), will ...

    US senator Barack Obama

    Obama’s Answer to Brazil and LatAm: the Audacity of Being Vague

    As the U.S. presidential campaign heats up, Barack Obama, the likely Democratic nominee, has ...