Brazilian Real Drops as Recession Deepens and China Trade Slumps

November 9, 2015 06:26 AM
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The Brazilian real slumped as economists in a central bank survey said the recession is worsening, while a disappointing trade report out of China shows it’s unlikely the Asian nation can help fuel a rebound anytime soon.

The real dropped 0.6 percent to 3.7903 per U.S. dollar as of 9:36 a.m. in Sao Paulo. The currency is down 30 percent for the year, making it the worst performer among 31 major tenders tracked by Bloomberg.

Brazil economists are forecasting the economy will shrink 3.1 percent this year and 1.9 percent next year, deeper than the 3.05 percent and 1.51 percent contractions they had estimated a week ago, according to the central bank survey published today. Adding to Brazil’s economic woes, Chinese overseas shipments declined 6.9 percent in October in dollar terms, the customs administration said, a bigger decline than estimated by all 31 economists in a Bloomberg survey. China is Brazil’s biggest trading partner.

"At this stage, we are desperately watching the world’s growth engines sputtering, and it is now clear that the external demand and foreign investments that Brazil is craving could be further damaged by recent negative developments across Europe and Asia," said Ipek Ozkardeskaya, an analyst at London Capital Group. "The domino effect is taking place and there is unfortunately little to do in the short-run to avoid a spill over."

Swap rates on the contract maturing in January 2017, a gauge of expectations for Brazil’s interest-rate moves, rose 0.10 percentage point to 15.45 percent.


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Spell Check

11/9/2015 08:05 AM

  The weak Real is a drag for US grain exports since we can't compete with the low prices. As for china, I don't think their economy is as weak as it may appear. They're becoming more developed & self sufficient than they used to be so everyone is doing less trade with them. Their wages are higher so goods are more expensive than they used to be & many countries have weak currencies so less buying power to buy china goods. They produce more of their grains so less buying from them. The big construction boom is slowing so less building materials needed but that doesn't mean their economy is slowing. They're just getting closer to the end of the massive infrastructure building which was highly needed.


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