The Brazilian real’s foreign exchange rate weakened against the US dollar at the close Wednesday after strengtening slightly at the open, as concern about the European debt crisis continued to encourage purchases of the US currency by investors seeking a safe haven.
The real exited active trading at BRL1.8743 to the dollar, after closing Tuesday at BRL1.8601, according to Tullett Prebon via FactSet.
“The dollar continues to gain because of the uncertainy that still exists about the European situation,” said Reginaldo Galhardo, foreign exchange manager at the Treviso brokerage in Sao Paulo. “As long as there’s weakeness in Europe over the debt problem, this bad feeling will continue, and the market won’t calm down.”
The positive outcome of a bond auction in Italy Wednesday wasn’t enough to dispel worries about the situation there, Galhardo added.
The Italian Treasury auctioned EUR9 billion ($11.74 billion) worth of six-month treasury bills at a yield of 3.251%, less than half the amount it paid just a month ago. The result surprised investors still concerned that Europe’s policymakers are falling short in their efforts to contain its debt problems.
Nonetheless, yields on the country’s benchmark long-term bonds remain uncomfortably close to the 7% threshold economists consider unsustainable. Analysts said the yields serve as a potential harbinger for Thursday’s planned long-term debt auction, which could be a stiffer test for the euro zone’s third largest economy and one of its most financially troubled.
Trading in the real is mostly being affected by events outside Brazil, traders said, so the news that Brazil reported a primary surplus in November that brought the year-to-date figure to 99% of the government’s target for the full year also wasn’t enough to shake off the gloom.