SAO PAULO--The Brazilian real weakened beyond the
BRL2.00-to-the-dollar barrier in midafternoon trading Tuesday on
worries about the country's ability to compete in export markets.
The real traded in a range of BRL2.01 to BRL2.09 throughout June. The
real began to gain strength against the U.S. dollar last Friday after
European leaders announced a series of measures designed to damp
effects of a prolonged debt crisis.
On Monday, the Brazilian real strengthened beyond the
BRL2.00-to-the-dollar barrier for the first time since May, exiting
active trading at BRL1.9874 to the dollar.
However, Tuesday saw a reversal of fortune for the Brazilian currency.
In recent trading, the real was at BRL2.005 to the dollar.
In comments to reporters Tuesday, Brazilian central bank monetary
affairs director Aldo Mendes said, "Industry has been weak. This
increases the possibility that the government might want to see the
dollar at a stronger level than it is today."
Mr. Mendes was commenting on industrial production figures released
earlier Tuesday by the government. The figures showed a 0.9% decline
in industrial output in May against April.
The industrial figures came one day after equally disappointing data
on exports. Brazil's June foreign trade surplus dwindled to $807
million from $2.95 billion in April as both imports and exports
declined.
The biggest loser in Brazil's export sector in May was manufactured
goods. Government officials have consistently said over the past two
years that a strong Brazilian currency hurts the ability of
manufacturers to compete in international markets.
Traders interpreted Mr. Mendes's comments Tuesday to indicate a
government interest in maintaining a comparatively weak real as a way
to support exports.
The Brazilian central bank has not been hesitant about intervening in
the foreign exchange market. Mr. Mendes said interventions could occur
"at any time" and might take the form of central bank intervention in
forward sales and futures markets.
Write to Tom Murphy at tom.murphy@dowjones.com
(END) Dow Jones Newswires
July 03, 2012 14:19 ET (18:19 GMT)
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