(Bloomberg) -- Brazil President Jair Bolsonaro said he’d like to see a stronger local currency against the U.S. dollar, as it currently hovers close to an all-time low.
“I would like the dollar below 4 reais, but it’s not merely a question of domestic issues,” Bolsonaro told reporters in Brasilia on Wednesday. “There’s U.S. and China trade and the issue is that the whole world is interconnected. Any problem abroad has consequences for the entire world, not just here.”
Bolsonaro’s comments mark the first time he’s weighed in publicly on the currency as it tumbles on the back of a combination of domestic and international factors. A local oil action flopped earlier this month, frustrating expectations of massive capital inflows that could have propped up the real. Meanwhile, a recent sell-off in emerging market peers -- such as the Chilean peso -- as well as global trade tensions are also hitting the exchange rate.
Read more: Brazil Oil Auction a ’Total Disaster’ as Bidders Stay Away
“Bolsonaro’s comments show some discomfort on the issue,” said Andre Cesar, a political analyst at Hold Consultoria. “For a good part of his electoral base, a stronger dollar is bad. It brings back memories of the lack of the ability to travel abroad, and makes imported goods more expensive.”
Brazil’s real closed at 4.1994 per U.S. dollar on Tuesday. Local markets are closed on Wednesday due to a holiday.
The currency drop comes at a crucial moment for Brazil’s central bank, which has cut the benchmark interest rate to a record low of 5% to help boost lackluster economic growth. Still, the weaker real has prompted investors to pare bets of even more aggressive easing, as it has the potential to fan inflation by making imports more expensive.
Read more: Brazil Growth Pickup, Currency Pressure May Limit Rate Cuts
Speaking before a congressional hearing on Wednesday, central bank President Roberto Campos Neto said the country’s risk perception has improved even as the currency has weakened. He attributed part of the real’s tumble to international drivers including global dollar strength, as well as local issues including the November oil auction.
Campos Neto said it’s important to monitor how the exchange rate influences inflation going forward. The central bank could act using its monetary policy if consumer price expectations are affected, he said.
Bolsonaro and his economic team are working to implement a pro-market agenda, including a pension reform and planned privatizations of state-controlled assets. Analysts surveyed by the central bank have lifted 2020 growth expectations to 2.17%.
(Updates with analyst quote, remarks from Campos Neto.)
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