Reversal of Policy
The real tumbled to a level weaker than 2 per dollar on May 14 for the first time since 2009 after the central bank bought $7.2 billion in the spot market last month, the most since $8.4 billion in March 2011. The currency also weakened as policy makers cut borrowing costs and Europe’s sovereign-debt crisis diminished the prospects for Brazil’s financial assets.
The currency is still the biggest loser against the dollar in 2012 among its 16 most-traded counterparts tracked by Bloomberg, having fallen 6.1 percent.
The yield on the Brazilian interest-rate futures contract due in January 2014 dropped 10 basis points, or 0.1 percentage point, to 8.52 percent, paring its increase this week to 45 basis points. The yield rose 28 basis points yesterday, the most since June 2009.
Brazil’s inflation is more likely to be near the center of its target, or 4.5 percent, in 2012 because of lower oil prices, the government’s reduction of the so-called IPI tax on cars and expected cuts in energy tariffs, Valor Economico columnist Claudia Safatle wrote.