Friday, 17 July 2015 19:50
SAO PAULO: Brazilian financial markets dropped on Friday as mounting political turbulence threatened President Dilma Rousseff’s ability to pass reforms needed to pull Latin America’s largest economy out of recession.
The real weakened 1 percent after the speaker of Brazil’s lower house of Congress, Eduardo Cunha, announced on Friday that he was breaking with Rousseff’s government.
Cunha’s move does not necessarily mean an immediate departure of his PMDB party from Rousseff’s coalition, but it could complicate her efforts to pass austerity measures crucial to protect Brazil’s investment-grade rating. Cunha is also responsible in Congress for initiating a possible impeachment of Rousseff.
Other Latin American currencies also fell as investors feared an expected increase in US interest rates that is likely to reduce the allure of high-yielding emerging market assets.
“We have domestic and external reasons for a stronger dollar today,” said Jaime Ferreira, head of currency trading at brokerage Intercam in Brazil.
The Mexican peso lost 0.5 percent to an all-time low of 15.925 per dollar.
Brazil’s Bovespa index lost 0.7 percent, underperforming other benchmark stock indexes in the region.
Weighing on the Brazilian bourse were Petrobras shares, which slid more than 3 percent after the state-run oil company said it paid 1.6 billion reais ($ 508 million) to settle part of a tax dispute.
