The real headed for the biggest weekly drop since mid-December as signs of muted growth in Europe and concern about intervention on the currency market fanned speculation investment in Brazil will slump.
The real advanced to the strongest in a week after the Federal Reserve cut the cost of emergency dollar funding for European banks as part of a globally coordinated response to alleviate a dollar shortage.
Yields on Brazilian interest-rate futures contracts fell for the first time in four days after inflation unexpectedly slowed to within the government’s targeted range last year, prompting bets the central bank has room to speed up interest-rate cuts.
Brazil’s real fell to its lowest level since June on speculation the central bank will maintain its intervention policy to weaken the currency and amid concern political disputes may threaten U.S. and European recoveries.
Brazil’s real fell from a nine-month high after the central bank intervened to stem gains triggered by Finance Minister Guido Mantega when he signaled the government would allow the currency to rise another 5 percent.
Yields on Brazilian interest-rate futures contracts fell to a record low after industrial employment declined in April, adding to speculation policy makers will sustain the pace of reductions in borrowing costs.