Brazilian real tumbles amid falling commodity prices
The Brazilian real hit the skids on Monday, tumbling by the most in over five months as falling commodity prices and a move by president-elect Jair Bolsonaro to add another military man to his cabinet unnerved investors and gave some a reason to take profits.
The real fell as much as 2.9 per cent — the most since early June — to hit a seven-week low of R$3.9398 per dollar. The drop takes the currency’s losses over the past month to nearly 8 per cent — although it remains some 6.5 per cent higher from their mid-September lows.
The country’s benchmark Bovespa stock index, which hit a record high at the start of the month, also came off its recent peak, dropping as much as 1.1 per cent to 85,314.50.
The sharp moves lower come as iron ore prices were hammered once again on Monday. Futures for iron ore were down 4.8 per cent on China’s Dalian Commodity Exchange in early Asian trade, taking their drop since an October high to just over 15 per cent. Weaker commodity prices tend to have negative implications for major exporters like Brazil.
Adding to jitters, Mr Bolsonaro, who is set to take office on January 1, continued to fan fears of a drift to authoritarianism after he announced via Twitter the appointment of retired general Carlos Alberto Dos Santos Cruz as government secretary earlier on Monday.
Mr Bolsonaro — a former army captain who has expressed nostalgia for the country’s 1964-85 military dictatorship — has been packing his cabinet with military men since cruising to victory last month on a pledge to fight corruption and restore law and order. In addition to Mr Cruz, Mr Bolsonaro has also appointed retired generals as deputy president, national security adviser and defence minister.
The decline makes the real the day’s worst performing major currency and second worst performing EM currency after the Argentine peso.
Source: Financial Times