2012.05.31 16:40:23 MARKET TALK: BRL Weakness Behind Central Bank Rate Caution

10:40 (Dow Jones) Preventing further weakness in BRL is another reason for "parsimony" in Brazilian central bank rate cuts, says Nomura's Tony Volpon in a note. Recent BCB intervention clearly signals the government isn't comfortable with BRL much weaker than the 2.00 level; BRL has traded weaker than fundamentals suggest since the central bank's surprise August 2011 rate cut, suggesting that policy action may have added to BRL underperformance, Volpon writes. The central bank may -- despite assurances to the contrary -- be worried about the currency weakness on inflation, given the widely held opinion that a good part of BRL's recent fall may be permanent in nature, he says. (matthew.cowley@dowjones.com) Call us at (212) 416-2181 or john.shipman@dowjones.com (END) Dow Jones Newswires May 31, 2012 10:40 ET (14:40 GMT)