By Anna Kaiser, Contributing Reporter

RIO DE JANEIRO, BRAZIL – While the U.S. Dollar reached its highest value so far this year last Friday, May 24th, the Brazilian Real has lost financial worth, following a period of consistently increasing against the dollar. The weakening of the Brazilian currency has raised doubts about the dependability of the currency for foreign investors.

U.S. Dollar Strengthens Against Real, Rio de Janeiro, Brazil News
The Central Bank of Brazil in Brasília may intervene to protect the falling value of the real, photo by Jim/Flickr Creative Commons License.

The real has seen a 2.4 percent decrease in value in just one month. Such levels of depreciation have prompted the Central Bank to intervene in the past, but for the time being, it has taken no action.

Intervention is likely in the near future in order to control inflation, according to manager of analysis at XP Investimentos, Caio Sasaki. Brazil’s inflation rate reached 6.6 percent last year, two points above the tolerance threshold established by the government.

“The U.S. Dollar is still worrisome from the point of view of inflation, which reinforces the expectation that the Central Bank will intervene at any moment,” said Sasaki, as reported by Globo.

The U.S. Dollar to Brazilian Real exchange rate in the last year has generally fallen around R$2 to the dollar. With the dollar’s recent gains, the exchange rate reached the R$2.0525 to the dollar last Friday afternoon, reversing this year’s general trend of appreciation of the real.

The real reached its yearly high around early March at R$1.94 to the dollar. The U.S. Dollar has seen a 2.55 percent increase in value this month and a 0.38 percent increase this year.

Two years ago the real was at its strongest in recent history, when the dollar fell to almost US$1.5 to the real. Since then the government took action to help keep the foreign investment and export economy healthy.

Read more (in Portuguese)

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1 COMMENT

  1. Good news for the tourists from the United States who will visit Brazil.
    Good news for the Brazilian export sector.
    Bad news for Brazilian tourists who visit the US and won’t be buying as much anymore in the malls in the United States, which is bad news for retailers in the US who are desperate for more tourists out of Brazil, since local market is highly indebted (mortgage, credit cards, student loans, car loans,and have no job).

    Inflation in Brazil is caused by demand of more (experienced) workers and lack of investments in infrastructure, which can be solved, by investing in infrastructure (which is already happening) and by allowing more capable foreigners work in Brazil.

    The US is facing a deflation/inflation situation because of quantitative easing and lack of real economic growth, is in a dangerous situation…no way out, if you don’t let the too big too fail zombie banks fail.

    Long term winner: Brazil

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