Brazil’s Real Declines on Global Economic Recovery Concern

Brazil’s real fell for the first time in three days on concern that the pace of the global economic recovery will slow, spurring investors to seek refuge in the dollar.

The real declined 0.1 percent to 1.7882 per U.S. dollar at 5:01 p.m. New York time, from 1.7872 yesterday. It lost as much as 0.5 percent, touching 1.7960. The real has gained 29 percent this year, the best performer against the dollar among 26 emerging-market currencies tracked by Bloomberg.

“The movement in emerging markets this week can be written down to uncertainties,” said Alberto Boquin, a Latin American debt and currency strategist at Bank of America Corp., in a telephone interview. “People are waiting to see how the U.S. economy is holding up, especially the numbers coming out later this week.”

Confidence among U.S. consumers unexpectedly fell in September as a rising unemployment rate weighed on households. The Conference Board’s confidence index dropped to 53.1, from a revised 54.5 in August, a report from the New York-based group showed today.

U.S. durable goods orders unexpectedly declined in August and new home sales rose less than economists expected, according to reports published Sept. 25, adding to concern that the recovery in the world’s largest economy may falter.

Central banks in Colombia, Romania and Russia have lowered borrowing costs in a sign that additional stimulus is needed in many emerging markets to revive a sagging economy. Policy makers cut the Colombian benchmark lending rate a half-percentage point on Sept. 25. Russia’s and Romania’s central banks reduced rates a half-point today.

‘Dollar Story’

“It’s mainly a dollar story that is related to positioning,” said Paresh Upadhyaya, a senior vice-president at Boston-based Putnam Investments, who helps manage $12 billion, in an e-mailed comment. “Yesterday, bonds and equities rallied, so did the dollar.”

In the overnight interest-rates futures market, the yield on the contract due January 2011 fell one basis point, or 0.01 percentage point, to 10.17 percent.

Brazil’s central bank tightened the rules for banks to meet reserve requirements. Now banks can satisfy such requirements by buying loans only from lenders that have no more than 2.5 billion reais ($1.4 billion) in assets, down from a prior limit of 7 billion reais in assets, according to a central bank statement late yesterday. It’s the first step to dial back stimulus measures as credit markets are “gradually” coming back to normal after a global financial crisis.