Brazil is on the other side of the world from China, the epicentre of the coronavirus, but it has become one of the countries most directly impacted by the disease – which is a huge headache for the Central Bank of Brazil (BCB) and finance ministry.
The Brazilian real has been accelerating its depreciation trend in recent days – on Wednesday the dollar closed at $4.58, a fall of 1.5% in the day’s session, and by Thursday the real had fallen 13.9% in 2020.
The fresh falls came despite the BCB’s announcement it would conduct a fresh intervention in the FX market, selling swaps valued at $1 billion.
The problem for Roberto Campos Neto, BCB president, is that the market is pricing in fresh cuts to Selic, the bank’s base rate, after the decision by the US Fed to cut its base rate by 50 basis points.
The downward pressure on interest rates caused globally by the Covid-19 virus also fed into disappointing GDP data that preceded the crisis: on Wednesday, Brazil’s 2019 4Q GDP confirmed that last year the economy grew at just 1.1%,
