Brazil's currency eased on Friday as investors worried that a government defeat in a Senate vote on the nation's minimum wage could foretell further problems in passing economic reforms.
The real closed 0.45 percent weaker at 3.142 per US dollar. The decline followed Brazil's Senate vote on Thursday to raise the country's minimum wage to 275 reais ($88), above the 260 reais the government had proposed.
The increase, if it becomes law, would have a major impact on Brazil's finances by increasing government spending since public servants' pensions are tied to the minimum wage.
"Ahead of the vote, the market had already smelled something negative in the air, but it was able to interpret it in a positive way. It was all a big political fanfare on the Senate's part, and that, in the end, it's still the president's prerogative to veto the decision," said Carlos Camacho, a fund manager at GAP Asset Management in Sao Paulo.
But not all analysts were as positive. Gustavo Alcantara, a fund manager at Prosper bank in Sao Paulo said: "Markets were able to digest it, but it still shows government support is fragile and it might be hard to reverse this decision".
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