Real Dips as Brazil’s Economy Slows

The Brazilian real weakened today, following other riskier currencies in decline, on the signs that Brazil’s economy felt the negative impact of the European sovereign-debt troubles on the global economic recovery.
The seasonally adjusted index of the Brazilian economic activity, which often foreshadows a change of the gross domestic product, dropped 0.32 percent in October from September, compared with the median forecast of a 0.1 percent decline. Analysts are concerned as the retail sales and industrial output indicator were already showing an unpleasant picture. Investors bet that the nation’s central bank will slash the main interest rate by 50 basis points to 10.5 percent on its next policy meeting in January.
The inflation accelerated despite the negative macroeconomic data. The consumer prices index rose from 0.43 percent in October to 0.52 percent in November on the monthly basis. On the annual basis, the consumer prices grew 6.64 percent. The central bank’s target is 4.5 percent.
USD/BRL traded near it opening price of 1.8773 today as of 6:04 GMT, following the earlier rise to 1.8828. Yesterday, the currency pair reached 1.8848, the highest level since November 25.

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