Retail Sale in Brazil Drops, Drag Real Along

The Brazilian real dropped today as the report showed the retail sales in Brazil decreased and the problems in Europe made the higher yielding currencies, including the real, less attractive.
The retail sales declined 0.4 percent in August, following the revised rise by 1.2 percent in July. The median forecast promised a drop by just 0.1 percent.
The falling sales reinforced the case for Brazil’s central bank to cut the borrowing costs. Bank’s President Alexandre Tombini said that “moderate” cuts of the interest rates may protect the nation’s economy from the European debt crisis, without necessity to adjust the inflation target. Investors are betting the central bank will cut its key interest rate half a percentage point to 11.5 percent during its policy meeting on October 18–19.
USD/BRL traded at 1.7760 today as of 23:33 GMT after opening at 1.7640. The daily minimum for the currency pair was 1.7465 and the maximum was 1.7805.

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