Brazilian President Michel Temer said on Thursday there was no risk of a currency crisis in Latin America’s largest economy despite sharp falls in the exchange rate, while the central bank chief pledged to maintain the bank’s intervention in the market.
The Brazilian real plummeted to its weakest level in more than two years on Thursday, at 3.9671 to the dollar, amid concerns over the country’s fiscal outlook and uncertainty surrounding October’s wide-open presidential election to select a successor to market-friendly Temer.
Brazil’s benchmark Bovespa equities index also fell, declining as much as 6.5 percent before recovering some ground.
Investor confidence in Temer’s government was shaken after it was forced to reinstate costly fuel subsidies following a strike by truckers that brought the country almost to a halt.
The move prompted the resignation of the head of state oil company Petroleo Brasileiro SA and stirred concerns among investors over government finances as the economy struggles to gain momentum after a painful recession. Temer had made tackling Brazil’s hefty budget deficit a priority for his centre-right administration.