Brazil Real Gains as Economic Forecast Outweighs Political Woes

Brazil’s real advanced as economists said they expect a shallower downturn of the country’s economy than previously forecast, outweighing opposition in Congress to the government’s attempt to approve measures to trim the budget deficit.

The real gained 0.8 percent to 3.5836 per dollar as of 3:39 p.m. in Sao Paulo after earlier weakening 0.1 percent. Liquidity was reduced due to holidays in the U.S. and Europe. The central bank on Monday refrained from intervening to weaken the currency.

Economists now forecast the economy will shrink 3.81 percent this year, versus 3.83 percent previously. They also raised their growth outlook for next year from 0.55 percent to 0.5 percent. On the political front, leaders of seven of the major parties in Congress, which control more than half of Lower House and Senate, are signaling resistance to proposals made by acting President Michel Temer, especially a cap on government spending and changes to social security, according to a report in O Estado de S. Paulo.

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