The real depreciated to a four-year low (R$2.1815 per U.S. dollar) on Tuesday as protests against corruption and bad governance continued to swell in the streets of 12 Brazilian cities. The real has declined 9 percent since March forcing the Central Bank to take action to reduce inflationary pressure.
While the Brazilian police were preventing demonstrators from rushing government buildings, the country was bracing itself for the “adverse winds” caused by a stronger U.S. dollar, according to Central Bank president Alexandre Tombini. The bank intervened in the currency market for the eighth time this month, selling $4.6 billion in foreign exchange swap contracts to slow the currency’s decline. The Brazilian Treasury also worked to reduce inflation by holding its second unscheduled auction in five years, buying back approximately 2 million fixed-rate government bonds.
The real’s continued drop coincided with the second week of demonstrations, which originally began as a protest against increased bus fares. In the largest protest in 20 years, approximately 200,000 demonstrators marched in 12 Brazilian cities—including Brasilia, São Paulo and Rio de Janeiro—to protest, among other things, high taxes as well as increased government spending on the World Cup and Olympic games instead of health care and education.
While Brazilian President Dilma Rousseff voiced her support for peaceful protests, the demonstrations have attracted negative international attention leading up to the 2014 World Cup.
