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Exclusive: Brazil currency appreciation "somewhat exaggerated": government source
February 8, 2013 / 1:26 PM / 5 years ago

Exclusive: Brazil currency appreciation "somewhat exaggerated": government source

BRASILIA (Reuters) - The recent appreciation of the Brazilian real has been “somewhat exaggerated” given the fundamentals of the economy and future expectations for the country’s exchange rate, an official on President Dilma Rousseff’s economic team told Reuters on Friday.

The market has over-reacted and there is no reason for a consistent appreciation of the real as seen in the last few days, said the official who asked not to be named.

“You have to look at the fundamentals and try to abstract the short-term volatilities to then form a more coherent idea about the current moment of the exchange rate market, and more importantly of its future developments,” said the official.

The official added that the sharp appreciation of the real in the past few sessions is not justified given that dollars have been flowing out of the country so far this year.

The real trimmed some of its gains after the comments. It had opened more than 1 percent higher after comments by Brazilian officials that investors interpreted as signaling higher tolerance to a stronger currency.

In an interview with Reuters late on Thursday, Finance Minister Guido Mantega sounded more amicable to a stronger exchange rate as he mentioned the 1.85 per dollar threshold as an example of a level that will not be tolerated.

The real also strengthened 0.8 percent on Thursday after central bank president Alexandre Tombini’s said the bank is not comfortable with inflation in the short term.

Those remarks were posted on a newspaper Web site shortly after the government released data showing the country’s benchmark inflation IPCA index jumped 0.86 percent in January, which was its largest monthly rise in nearly eight years.

The real has strengthened 4.6 percent so far this year against the dollar.

Reporting by Alonso Soto Editing by W Simon

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