Brazil's real sank to a 10-year low as a record drop in retail sales added to concern that Latin America's largest economy is slumping.
The local currency slid 1.2 per cent to 2.8679 per dollar at the close of trade in Sao Paulo, the lowest closing level since October 2004. It is 0.6 percent weaker than the year-end median forecast of 2.85 per dollar among analysts surveyed by Bloomberg.
The real fell after the national statistics agency reported that retail sales tumbled 2.6 per cent in December from a month earlier, the biggest drop since the series of data began in 2000. Analysts predict zero growth for Brazil this year, according to the median of about 100 estimates in a central bank survey published Monday.
"Investors are sensitive to all this negative economic data," Reginaldo Siaca, a currency manager at Tov Corretora de Cambio in Sao Paulo, said in a telephone interview.
One-month implied volatility on options for the real, reflecting projected shifts in the exchange rate, was the highest among emerging-market currencies tracked by Bloomberg after the ruble.
Retail sales rose 0.3 per cent in December from a year earlier, slower than the median forecast, which called for a 2.4-per-cent increase. The broader retail index, which includes cars and construction materials, fell 2.2 per cent, compared with a projected 1-per-cent gain. Regulated prices for items such as electricity, gasoline and buses rose 2.5 per cent in January, the most in almost 12 years.
Swap rates on the contract maturing in January 2016, a gauge of expectations for changes in Brazil's borrowing costs, increased 0.26 percentage point to a six-year high of 13.26 per cent as the currency weakened.
To support the real and limit import price increases, Brazil sold the equivalent of $98-million of currency swaps Wednesday and rolled over contracts worth $629.6-million. The central bank plans to offer as much as $100-million a day until at least March 31.
Brazil doesn't intend to keep the currency artificially strong, Finance Minister Joaquim Levy said in Sao Paulo on Jan. 30. The ministry's press office said later that day that Levy's foreign-exchange comments referred to the global scenario and not just Brazil.
"Investors interpreted Levy's comments as a message that the government is not worried about the currency devaluation, that it won't make an effort to boost the real," Mr. Siaca said.