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USD/BRL breaks above 4, at all-time low

FXStreet (Córdoba) - The Brazilian real continues to decline in the currency market and is trading at the lowest level since its creation in 1994 against the US dollar. USD/BRL broke above 4.00 and jumped to 4.06. It is trading at 4.05, up 1.70% for the day.

Since last week the real lost 5% against the US dollar and almost 70% during the last 12 months. It didn’t even manage to stabilize last week when the US dollar weakened in the market, following the FOMC decision.

Brazil’s political and economic situation continues to add pressure to the currency and also to Brazilian assets. The Bovespa index is falling today 2.45% as Congress debates legislation that would raise salaries and pensions, increasing spending and generating more political turmoil. Dilma Rousseff vetoed the law earlier.

Another rating agency may downgrade Brazil’s rating below the “investment grade” soon, adding to fears that the current situation could turn worst for the real. With the economy in recession, more gains for the US dollar above 4.00 seem probable and would increase pressure on the Central Bank of Brazil to act in order to prevent a deeper depreciation.

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