Brazil's real posts record low close as cenbank impact fades, GDP outlook dims

BRASILIA, Feb 18 (Reuters) – Brazil’s real registered an all-time closing low of 4.3573 reais per dollar on Tuesday as the impact of last week’s central bank intervention faded and more economists cut their 2020 growth forecasts.

Against a broadly strengthening dollar, Brazil’s currency fell toward last week’s all-time intraday low below 4.38 reais per dollar, which it plumbed before the central bank’s $2 billion intervention in the swaps market on Thursday and Friday.

Economists at U.S. bank Citi were the latest on Tuesday to lower their 2020 gross domestic product growth forecast, to 2.0% from 2.2%, citing the fallout from the coronavirus outbreak in China, Brazil’s largest trading partner.

They also lowered their outlook for inflation and the real, predicting that Brazil’s benchmark interest rate will remain at 4.25% until well into next year and that the dollar will not fall below 4.00 reais until at the end of next year at the earliest.

“In addition (to growth worries), there are concerns regarding whether higher global uncertainty might constrain capital inflows to emerging markets, which together with the potentially lower commodity prices should sustain a weaker domestic currency,” Citi economists wrote in a note Tuesday.

They now see the real ending this year at 4.14 reais per dollar, the current account deficit widening to 3.3% of GDP, and inflation falling to 3.5%, well below the central bank’s 4.00% goal.

Economists at UBS and Barclays recently cut their 2020 GDP growth forecasts to 2.1%, while Morgan Stanley and Goldman Sachs say downward revisions on the back of the coronavirus fallout are likely. (Reporting by Jamie McGeever; Editing by Richard Chang)

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