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Brazil's Real Plunge (Henrique)

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Brazil's Real Plunge (Henrique)

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Renato Schiavo
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strengthen strengthening turmoil benchmark hiked auctions signalled bill bond weighing watered tumbled lawmakers

Brazil's real by the most in over two years to a fresh record low on Wednesday and stocks were also under pressure as financial markets put the Brazilian government's spending plans and wide budget deficit to the test .
The local currency hit its weakest - ever mark of 6 . 3139 to the dollar before closing down 2 . 9% at 6 . 2896 . It was its largest daily decline since November 2022 . The currency earlier closed for trading locally at 6 . 26 , down 2 . 7% .

Further on the real late in the session , the U . S . Federal Reserve cut interest rates on Wednesday and it will slow the pace at which borrowing costs fall , the dollar across the board .
The Bovespa stock index ( . BVSP ) , opens new tab closed at a six - month low , down 3 . 15% in its largest daily percentage drop since November 2022 .
The cost of insuring exposure to the country's debt was at a 14 - month high , with investors anxious as Latin America's largest economy faces a deepening financial market crisis .
Investors have been doubtful whether will be able to pass the main part of a fiscal bill aimed at putting government finances on a more sustainable footing .

" Markets are mainly worried about the overall fragile fiscal trajectory and the fact that it is affecting inflation expectations via the pressure on the real , " said Thomas Haugaard , portfolio manager at Janus Henderson in Copenhagen .
" Often we have to see the market revolting before painful adjustments come , but for now it does not look like there will be a fiscal response to the recent . "

Congress late on Tuesday approved the main text of a but has yet to vote on some amendments proposed by lawmakers , while Finance Minister Fernando Haddad said Wednesday the Senate is ready to vote on the bill as soon as Congress sends it .

" We are doing our part : sending ( Congress ) the measures , working to make sure they are not down , and convincing people these measures are needed to the fiscal framework , " Haddad said .
Brazil's central bank held spot U . S . dollar for the third consecutive session on Tuesday and reaffirmed its tough monetary policy stance .
" The central bank more than expected and have been intervening in the currency so they are doing their part , " said Shamaila Khan , head of fixed income for emerging markets and Asia Pacific at UBS Asset Management .