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Weaker currency “as expected,” says Brazilian Economy minister
For the first time ever, we wake to the U.S. Dollar being worth BRL 4.21—yet a new nominal record. But that doesn’t scare Economy Minister Paulo Guedes, for whom such an exchange rate was expected—and that Brazilians should become accustomed to a new reality of lower interest rates and high exchange rates. “We have a floating currency, so it floats,” he said.
It is worth remembering that when we discount for inflation, the 2019 currency exchange rate is nowhere near September 2002—which would be, in today’s values, around BRL 10.27.
Why it matters. In 2019 alone, the Brazilian Real lost 9 percent against the USD—making it one of the worst-performing emerging currencies this year. A weaker currency puts pressure on companies that import a lot—thus making purchases in USD—narrowing their profits. In a sluggish economy, that can spell trouble for many players.
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