Brazilian markets slipped, with declines limited as ongoing dollar weakness is seen benefiting countries that carry heavy dollar-denominated debts and are eager for any support in curbing inflation.
Also, traders noted that last week’s reports, indicating China will boost its investments in South America’s resource-rich countries in the coming years, are bolstering sentiment toward the region.
Brazil’s benchmark Bovespa Index shed 104.44 points, or 0.43%. Brazilian shares pulled back, following Monday’s record close.
Brazilian equities are been propelled upward mainly by net foreign investments, which totaled approximately US$ 600 million so far this month, news services reported, citing traders.
One trader noted that it is unclear whether this cash is going into the general stock market or the recent spate of initial public offerings.
Foreign investors have been drawn in by the strength of the Brazilian currency versus the U.S. dollar, as well as favorable sentiment toward the robust performance of Brazil’s economy.
On the economic front, Brazil’s closely watched IPCA Broad Consumer Price Index increased 0.63% in the month ended November 15, accelerating from a 0.32% rise in the month to mid-October and a 0.44% jump over the month of October.
The surge was primarily based on higher fuel prices. That result came in near the high end of analyst predictions, with estimates ranging from a rise of 0.55% to 0.65%.
Analysts commented that rising prices amid the fastest economic growth in eight years could drive the central bank to hike its benchmark Selic interest rate half a percentage point next month from the current 17.25%.
Investors remain concerned that higher interest rates could slow the economy if inflation refuses to subside.
Thomson Financial Corporate Group