(Bloomberg) -- Finance Minister Fernando Haddad said the Brazilian real may be facing a “speculative attack” amid a selloff sparked by mounting fiscal concerns.
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“There may be speculative attacks, but I don’t want to make a judgment about that, because the Finance Ministry works with fundamentals,” Haddad told reporters in Brasilia on Wednesday, adding that he expects the currency to settle down.
The real has been the world’s worst-performing currency over the past four sessions and is down more than 20% against the dollar this year, as investors express deepening skepticism about President Luiz Inacio Lula da Silva’s commitment to reining in a soaring fiscal deficit.
It extended losses to as much as 1.3% following Haddad’s remarks, falling as low as 6.19. Swap rates also extended advances, after falling earlier in the wake of Treasury auctions to buy and sell notes and bonds in an effort to reduce volatility.
The government is currently seeking to win approval for a series of measures that would cut 70 billion reais ($11.3 billion) in spending, a bid to shore up public accounts.
The lower house of Congress approved the first part of the package Tuesday night. Although it weakened some provisions, the government’s leader in the lower house, Jose Guimaraes, said in an interview that the changes would not effect the overall fiscal impact.
Haddad said Wednesday that the government is pushing Congress to avoid further watering down key elements of its plan, calling on lawmakers to act with “sensibility.”
Brazil’s central bank has moved to try to stem the currency slide with a series of four interventions over three days. It sold more than $3 billion in local markets through back-to-back auctions Tuesday.
--With assistance from Leda Alvim.
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