Brazilian Currency Leads Global Declines as Fitch Reviews Rating

Brazilian Currency Leads Global Declines as Fitch Reviews Rating

By Paula Sambo

10:16 AM BRT
March 17, 2015

(Bloomberg) — Brazil’s real slumped to a 12-year low and led global declines as Fitch Ratings said it’s reviewing the nation’s investment-grade credit rating.

The real depreciated 1 percent to 3.2786 per dollar at 10:02 a.m. in Sao Paulo, the weakest level on a closing basis since April 2003. The drop was the biggest among 31 major currencies tracked by Bloomberg.

Speculation that a stalled economy and fiscal weakness will lead to a sovereign credit downgrade has pushed the real down 19 percent this year. Finance Minister Joaquim Levy is planning to meet representatives of Fitch on Wednesday in Brasilia, according to a person close to the government’s economic team, who isn’t authorized to speak publicly and asked not to be identified.

“Investors are anxious about Fitch’s meeting,” said Sidnei Nehme, the executive director at NGO Corretora in Sao Paulo. “While agencies have been patient to allow Levy some time to prove his plan works, improvements don’t happen overnight.”

Tony Stringer, a Fitch managing director, said in Hong Kong that Brazil’s government has limited ability to stimulate growth and cited the central bank’s increase of borrowing costs to curb inflation. An announcement on the nation’s sovereign rating may come in a few weeks, Stringer said. The company ranks Brazil at BBB, the second-lowest level of investment grade.

Moody’s Investors Service cited a stalled economy and fiscal challenges when it put Brazil on negative outlook in September, six months after Standard & Poor’s cut the nation to one level above junk.

Swap rates on the contract maturing in January 2016, a gauge of expectations for changes in borrowing costs, climbed 0.07 percentage point to 13.93 percent.