Brazil real gains as government cuts IOF tax on foreign loans

RIO DE JANEIRO Wed Dec 5, 2012 7:09am EST

RIO DE JANEIRO Dec 5 (Reuters) - Brazil's real strengthened early on Wednesday after the government reduced the scope of a financial transaction tax on foreign loans, facilitating dollar inflows to the country.

The real gained 0.5 percent to 2.1058 per dollar after the government said only foreign loans of up to one year will keep paying the so-called IOF tax, which remains unchanged at 6 percent. Previously, the tax was levied on loans of up to two years.

In a strategy to curb the real's recent depreciation trend, Brazilian policymakers have been reversing in the past few days a series of measures aimed at capping capital inflows to the country.

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