- Title: BRAZIL: Currency reaches 12-year high
- Date: 8th July 2011
- Summary: SAO PAULO, BRAZIL (JULY 26, 2011) (REUTERS) VARIOUS OF SAO PAULO'S SHOPPING DISTRICT KNOWN AS 25 OF MARCH STREET VARIOUS OF SALESMAN COUNTING MONEY BEHIND HIS STREET STAND VIEW OF STREET STANDS AND PEOPLE WALKING VARIOUS OF SALESMAN COUNTING MONEY AND PUTTING AWAY HIS WALLET VARIOUS OF ECONOMIC ANALYST, ANDRE PERFEITO, WORKING ON HIS COMPUTER (SOUNDBITE) (Portuguese) ECONOMIC ANALYST, ANDRE PERFEITO, SAYING: "A strong real is a reflection of a country that is working well and to make the real to lose value, it would be necessary -- in some degree -- to weaken this country that is moving so fast, and that would possibly create the perception that it isn't doing so well and the government obviously doesn't want that. So a policy that would be positive in the sense of not destroying the 'asset Brazil' which is making the real stronger, would be to drain the excess dollar reserves and that would happen through an intervention by the central bank." PEOPLE WALKING IN BUSINESS AND SHOPPING DISTRICT EXTERIOR OF RETAIL STORE VARIOUS OF CUSTOMERS INSIDE STORE CLOSE OF PRICE TAG ON REFRIGERATOR ON DISPLAY OUTSIDE STORE (SOUNDBITE) (Portuguese) ECONOMIC ANALYST, ANDRE PERFEITO, SAYING: "How will this (strong real) affect Brazilians on the short term? The real will continue to strong and we will continue to do what we have been doing, which is travelling more abroad, buying a lot of imported goods, a lot of high-tech goods... In Brazil's case this scenario should continue for some time." RIO DE JANEIRO, BRAZIL (JULY 26, 2011) (REUTERS) EXTERIOR OF RIO'S INTERNATIONAL AIRPORT CONTROL TOWER PLANES ON TARMAC WAITING TO TAKE OFF PASSENGERS WALKING IN AIRPORT TERMINAL VIEW OF FLIGHT PANEL PASSENGERS IN TERMINAL VIEW OF FLIGHT PANEL VARIOUS OF PASSENGERS IN CHECK-IN LINE (SOUNDBITE) (Portuguese) BRAZILIAN ENGINEER LIVING IN THE U.S., FERNANDO LOPES, SAYING: "We were considering visiting Brazil again in two years but now we are more likely to come back only in 2014 for the World Cup." VARIOUS OF WOMEN IN LINE FOR CHECK-IN (SOUNDBITE) (Portuguese) BRAZILIAN RETIREE, IANE WAYNE, SAYING: "It is much easier now. I can even do this (visit her daughter) more frequently." VARIOUS OF CHILEAN TOURIST IN LINE FOR CHECK-IN (SOUNDBITE) (Spanish) CHILEAN TOURIST, ALEJANDRO PELFINI, SAYING: "The real is more expensive than we had thought. The exchange rate is very expensive in relation to the dollar and the prices here, because of inflation, are also much higher than we had expected." PASSENGERS IN AIRPORT TERMINAL PLANES ON TARMAC
- Embargoed: 23rd July 2011 13:00
- Keywords:
- Location: Brazil, Brazil
- Country: Brazil
- Topics: Economy
- Reuters ID: LVAEI3ZLNKBLL10Q1H5IP5T53CPE
- Story Text: Brazil's currency, the real, gained to its strongest levels in 12 years on Tuesday (July 26), as investors bet domestic interest rates and growth will outpace those in more developed markets.
The real jumped to 1.53 to the dollar, its strongest intraday price since January 1999, shortly after Brazil's central bank ended its crawling-peg exchange-rate system and let the currency float freely against the dollar.
The robust currency has also put Brazilian consumers on spending spree as they are buying more high-tech goods and traveling abroad.
And as the real gains, calls from politically powerful manufacturing industries to stop the strong currency from pricing their products out of export markets will rise.
Andre Perfeito, a chief economist who helps oversee $1.3 billion dollars in assets at the Gradual Investimentos, said the Brazilian currency is likely to maintain its trend.
He said the government is avoiding the so called "macroprudential" measures because it is afraid of putting brakes on the country's booming economy.
"A strong real is a reflection of a country that is working well and to make the real to lose value, it would be necessary -- in some degree -- to weaken this country that is moving so fast, and that would possibly create the perception that it isn't doing so well and the government obviously doesn't want that. So a policy that would be positive in the sense of not destroying the 'asset Brazil' which is making the real stronger, would be to drain the excess dollar reserves and that would happen through an intervention by the central bank," he said.
Brazil's central bank has spent some $36 billion intervening in the markets in an effort to slow the rise of the real in the first six months of the year. But despite its efforts the government of President Dilma Rousseff is seeing few intervention options at this time.
Perfeito said the effects of a strong currency would continue to be felt among Brazilians.
"How will this (strong real) affect Brazilians on the short term? The real will continue to strong and we will continue to do what we have been doing, which is travelling more abroad, buying a lot of imported goods, a lot of high-tech goods... In Brazil's case this scenario should continue for some time," he said.
Lines of chattering Brazilians carrying duty-free bags are taking over airports from Miami to Buenos Aires. Frenzied shopping is the norm for Brazilian tourists abroad, who face some of the world's highest prices at home thanks to heavy import taxes.
Brazilians have also requested a record number of passports to travel abroad over the past two years.
For those who get their pay checks in reais, life has become easier. But this is not the case for engineer Fernando Lopes who moved with his family to the U.S. a few years ago.
"We were considering visiting Brazil again in two years but now we are more likely to come back only in 2014 for the World Cup," he said.
Iane Wayne, whose daughter is living in Argentina, said she was affording to visit her more often now than a few years ago.
"It is much easier now. I can even do this (visit her daughter) more frequently," she said.
Chilean tourist, Alejandro Pelfini, said he was shocked by the real's exchange rate.
"The real is more expensive than we had thought. The exchange rate is very expensive in relation to the dollar and the prices here, because of inflation, are also much higher than we had expected," he said.
The strong currency and consumption power of Brazil's burgeoning middle class already has helped make the Latin American giant one of the world's few engines of growth, propelling its economy at a 9 percent annual pace in the first three months of 2010. - Copyright Holder: REUTERS
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