Oct. 28 (Bloomberg) — Brazil’s currency fell for the first day in three after China boosted interest rates, raising investor concern that demand for the country’s main commodity exports such as steel and soybeans will decline.
China’s central bank today raised its benchmark interest rate for the first time in nine years, stepping up efforts to curb inflation in the world’s fastest-growing major economy. China is Brazil’s second-biggest trading partner after the U.S., accounting for about 7 percent of the country’s exports, according to Brazil’s Trade Ministry.
“The rate increase in China is worrisome,” said Helio Ozaki, currency trader at Sao Paulo-based Banco Rendimento. “That will slow the pace of growth in China.”
The real fell 0.3 percent 2.8705 per dollar at 8:33 a.m. New York time from 2.8615 per dollar late yesterday, paring its 2004 gain to 0.7 percent, the third-worst performance against the dollar among the 16 major currencies.
Record exports — which Brazil’s government forecasts will reach $94 billion this year — has pushed the real up 7.5 percent against the dollar since June 30, the second-best performance of the major currencies.
Slower growth in China may reduce demand for Brazilian products and commodities prompting the country to export less, Ozaki said.
Brazil’s trade surplus probably will fall to 2003 levels next year because commodity prices are declining and faster economic growth is helping boost imports, Trade Minister Luiz Fernando Furlan said yesterday.
The surplus will narrow next year to about $25 billion from the government’s forecast of a record $32 billion this year, Furlan said.
Brazil’s benchmark bond maturing in 2040 fell 0.85 cent on the dollar to 110.75, boosting the yield to 9.90 percent, according to JPMorgan Chase & Co.
To contact the reporter on this story:
Romina Nicaretta in Sao Paulo at at Rnicaretta@bloomberg.net