Brazil: Brazilian real falls to 12-year low, Central Bank ends swap program
April 16, 2015
In March, the Brazilian real (BRL) continued the downward trend that started in April 2014, falling sharply against the U.S. dollar. The real fell to a 12 year-low on 19 March and closed at 3.29 BRL per USD, which represented a 16.0% depreciation over the same day last month. On an annual basis, this represented a 40.2% decline in value from the same day of the previous year.
The sharp depreciation comes amid a deteriorating outlook for 2015 and increasing political uncertainty in the country. On 15 March, over one million protesters took to the streets, calling for the impeachment of President Dilma Rousseff. Rousseff’s approval ratings have fallen to an all-time low and she is facing rising hostility in Congress stemming from the ongoing Petrobras scandal and the poor performance of the economy.
After hitting 19 March’s low, the real appreciated in the following days. However, the currency failed to gain much of the lost ground following the Central Bank’s announcement that it was ending its program of foreign-exchange rate swaps on 24 March. The program, which ended 31 March, had been supporting the currency; however, it had become a large fiscal liability for the Central Bank.