* Mendes says real is weakening in line with global move
* Real weakens more than 1 pct after Mendes' comments
* Mendes adds that bank to act if real is out of sync
By Sujata Rao and Philip Baillie
LONDON, June 4 Brazil will have to live with a
weaker currency if its depreciation against the U.S. dollar is
in line with the movement of other currencies, the Brazilian
central bank's director for monetary policy said on Tuesday.
In comments that drove down its exchange rate, the official,
Aldo Mendes, said that "there is nothing we can do" if the
depreciation of the Brazilian real is in synch with a
global currency trend.
"While the real is walking (in line) with all other
currencies in a global movement, it is normal and we have to
live with this," Mendes, who sits on the central bank's
eight-member board, told reporters at an investors' event in
He added that bank will intervene in the local forex market
if the real does not follow the global trend.
The real erased early gains and weakened about 1
percent to 2.148 per dollar after Mendes' comments, which poured
cold water on expectations that the central bank would defend
any specific floor to the currency.
The real fell much more than other regional currencies like
the Mexican peso and the Chilean peso, which
weakened 0.29 percent and 0.1 percent respectively.
"Mendes spoke about the currency and that made investors
more confident to buy dollars," said a trader with a large
Last week, the real fell to its weakest level in four years
on concerns of a possible withdrawal of U.S. stimulus measures
and speculation by local investors about policymakers' tolerance
of a weaker currency. In the past three months, the real has
weakened the most among the world's 36 most traded currencies
tracked by Thomson Reuters.
The sharp weakening of the real could push up the value of
imported goods, stoking inflation, which clocked 6.46 percent in
the 12 months to mid-May, just slightly below the official
inflation target range ceiling of 6.5 percent.
The central bank surprised investors on Wednesday by
raising its benchmark interest rate by a larger-than expected
50-basis-points hike to take it to 8 percent.
Mendes backed last week's 50-basis-point hike in the
benchmark rate but was one of two dissidents in the previous
meeting who voted against a rate increase, citing
disinflationary forces from slower global economic expansion.
In theory, a rate hike should ease the pressure on the real
as it increases the appeal of Brazilian bonds, luring more U.S.
dollars into the local market, all other factors being equal.
The bank's president Alexandre Tombini said on Sunday that a
weaker real should have "limited" impact on inflation, but that
the bank is ready to step into the market if needed to stem
However, other officials signaled that the government was
unlikely to let the real weaken much more as fighting inflation
has turned into the top priority of President Dilma Rousseff
ahead of her re-election campaign next year.