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Asia Pacific+65 6212 1000
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A customer withdraws Brazilian real banknotes at a cash machine in Sao Paulo on Tuesday. Brazil’s central bank sold more than $3 billion on the spot market Tuesday but failed to stem a currency selloff.
Photographer: Tuane Fernandes/Bloomberg
Brazil took extraordinary measures Tuesday to stem a collapse in its currency that’s quickened in recent weeks amid investor fear of soaring budget deficits. In the latest of a series of aggressive moves, the central bank sold over $3 billion in local markets by way of back-to-back auctions, its fourth intervention in three days. The maneuver halted a sharp selloff that’s pushed the real down more than 20% this year to a record low—the most among major currencies. The weakness that’s engulfed it however is spreading across assets, with Brazil’s government dollar bonds leading losses in emerging markets. President Luiz Inacio Lula da Silva last month unveiled new income tax breaks alongside a plan to cut $11.5 billion in spending. Traders however didn’t like Lula’s apparent interest in also boosting economic growth. Meanwhile a key piece of his spending cut plan is set to be watered down over concerns that changes to a social program will hurt the poor. Lawmakers are seeking changes to the legislation in order to maintain financial protections for needy families.
Honda and Nissan are preparing to start negotiations on a possible merger, Japan’s Nikkei reported Tuesday. Such a deal—which could eventually expand to include Mitsubishi—would create an automotive rival to Toyota, effectively consolidating the Japanese auto industry into two camps. It would also provide Honda and Nissan with more resources to compete with larger peers after downsizing long-held global partnerships with other carmakers: France’s Renault for Nissan and General Motors for Honda. The move toward a merger would follow a decision by the two companies earlier this year to work together on electric vehicle batteries and software.
Brazil Takes Extraordinary Measures to Fight Currency Drop – Bloomberg.com
