Brazil: Brazilian real continues sinking in September
September 10, 2015
The Brazilian real’s (BRL) downward spiral continued in recent weeks, as the currency plunged to a new 12-year low in September against the U.S. dollar. The downward trend that started in April 2014 has been fueled by an ongoing slew of poor economic data and growing uncertainty that the government will be unable to halt the economy’s decline. On 4 September, the real fell to 3.84 BRL per USD, which represented a 6.2% depreciation over the same day last month. The figure represented a 44.7% decline in value from the start of the year and a 71.4% decline in value from the same day of the previous year. The real is quickly approaching its all-time low of 4.00 BRL per USD that was tallied in 2002.
The sharp depreciation comes amid a deteriorating outlook for Brazil’s economy and increasing political turmoil. The economy entered into a technical recession in the first half of this year and the country’s fiscal accounts have worsened sharply. Moreover, President Dilma Rousseff’s approval ratings have fallen to an all-time low and a loss of support in Congress has impeded many of the government’s attempts to shore up Brazil’s accounts. In addition, exchange rate movements in China and an anticipated tightening in the U.S. monetary policy have contributed to a high level of market volatility across currencies.