Brazil’s real fell to its weakest level against the US dollar since 1994, dropping 2.8% and reaching 6.26 per dollar, due to investors’ frustration with President Luiz Inácio Lula da Silva’s efforts to rein in government spending.
A bill aimed at slashing 70-billion-real ($11 billion) in government spending is being debated in Brazil’s lower house of Congress, but some market players say it’s insufficient. The real has lost nearly 23% of its value against the US currency this year.
The central bank has intervened to stem the real’s slide, but its efforts have largely failed. Economists warn that the currency’s weakness could trigger inflation as soon as January, increasing costs of Brazilian imports.
President Lula downplayed concerns in the financial markets, saying his administration is fiscally responsible and that excessive spending would harm the poor. However, some analysts disagree, citing the bill’s limitations.
Brazil’s Economy Minister Fernando Haddad also defended the real, saying its depreciation doesn’t reflect the country’s improving inflation and unemployment figures. The government’s currency float has led to an atmosphere of uncertainty, which may impact the real’s value in the short term.
Source: https://apnews.com/article/brazil-real-currency-record-low-8629c2ac1bb695f659aed95bfd8b3b99