Brazil's real led global losses as a weakening economic outlook overshadowed central bank measures to support the currency.
The real fell 1.2 percent, to 2.7153 per U.S. dollar, at 5 p.m. in Sao Paulo, the most among 31 major counterparts. Swap rates, a gauge of expectations for changes in Brazil's borrowing costs, climbed 0.09 percentage point to 12.84 percent on the contract maturing in January 2016. The currency posted on Friday a weekly drop of 3.8 percent, its biggest since September.
While analysts surveyed by the central bank lowered their 2015 median economic growth outlook for a fifth straight week, they predicted that inflation would accelerate further above the official target. The real tumbled last week as state-run Petroleo Brasileiro SA, at the center of nation's worst-ever corruption scandal, was reduced to the lowest level of investment grade by Moody's Investors Service.
“You don't see many reasons to bet on Brazil at the moment,” Reginaldo Galhardo, foreign-exchange manager at Treviso Corretora de Cambio in Sao Paulo, said in a telephone interview. “Fundamentals are worsening more and more, and the forecasts reflect that.”
Analysts raised their inflation outlook for this year to 7.01 percent and lowered their forecast for gross domestic product growth to 0.03 percent, according to the median of estimates in a central bank survey of about 100 analysts conducted Jan. 30 and published Monday. The official target for annual inflation is 2.5 percent to 6.5 percent.
Itau Unibanco Holding SA sees Brazil's GDP contracting 0.5 percent versus a previous forecast of 0.2 percent growth, according to an e-mailed report Monday.
The nation posted a trade deficit of US$3.2 billion in January, wider than the $3 billion shortfall forecast by analysts surveyed by Bloomberg.
Brazil extended the maturity on all of the 13,000 currency swap contracts it offered to roll over, worth $631.9 million, compared with 10,000 in daily auctions last month. It sold the equivalent of $98.1 million of swaps supporting the currency and limiting import price increases. The central bank plans to offer as much as $100 million a day in swaps until at least March 31, compared with $200 million daily last year.
“The currency intervention program supports the real in the near term, but it won't last forever,” Galhardo said. “The long-term tendency is for the currency to weaken.”
–With assistance from Paula Sambo in Sao Paulo.
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