Brazil’s Real Falls to Over Three-Year Low on Commodity Slump

By Adriana Brasileiro

Dec. 5 (Bloomberg) -- Brazil’s real fell to the lowest in more than three years as a slump in commodity prices and the worldwide economic slowdown hurts demand for the country’s export products and financial assets.

The currency declined for a fifth day, dropping 1.7 percent to 2.5459 per dollar at 8:59 a.m. New York time, from 2.5035 yesterday. It touched 2.5717, the lowest since April 2005. The real has depreciated 9.6 percent this week.

Brazil’s central bank offered to buy reais in the foreign- exchange market in an effort to prop up the currency. The bank paid 2.5355 per dollar in the auction.

Yields on local bonds and interest-rate futures contracts fell after Brazilian inflation unexpectedly slowed in November.

Inflation, as measured by the benchmark IPCA index, slowed to 0.36 percent, lower than estimates by all 40 economists in a Bloomberg survey. The annual inflation rate fell to 6.39 percent from 6.41 percent a month earlier, the upper end of the central bank’s target of 2.5 percent to 6.5 percent.

The yield on the zero-coupon note due in January 2010 decreased 28 basis points, or 0.28 percentage point, to 13.53 percent, according to Banco Votorantim.

The yield on Brazil’s overnight futures contract for January 2010 delivery dropped 28 basis points to 13.42 percent.

To contact the reporter on this story: Adriana Brasileiro in Rio de Janeiro at abrasileiro@bloomberg.net