Brazilian Real Posts Weekly Drop on Chinese Demand

The Brazilian real, ranked as the best performing currency in foreign-exchange markets during the past year, posted another weekly drop and ended the month losing versus most of the main traded currencies as appeal for Brazilian raw materials declined on renewed risk aversion.

The Brazilian currency reached the lowest rate in 2010 versus the U.S. dollar this Friday as both international and national scenarios provided traders with pessimistic news that fueled an exodus of capital from the emerging South American economy. Not only in the Eurozone budget deficits are concerning traders, and in Brazil, despite central bankers referring to the problem as something temporary, the gap in national accounts is affecting the real’s outlook, while, in the international sphere, China’s lending restrictions are fueling speculations that demand for Brazilian commodities are likely to decline, also impacting real’s price in currency markets, specially versus a stronger greenback.

The global trading scenario is negative for emerging markets and commodity-related currencies, which are in both situations, the case for the real, according to analysts. As long as key-countries like the U.S. and China stress on creating new regulations for bank loans, the real is likely to suffer.

USD/BRL ended the week at 1.8740 after falling during all trading sessions this week, and from as low as 1.8050 last Monday.

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