Brazil's real fell to a two-week low on Thursday, underperforming its Latin American peers, as investors assessed the impact of the central bank's decision to cut borrowing costs to an all-time low. The real slid 0.7% and interest rate futures tumbled to new lows after the central bank signaled it was willing to loosen monetary policy further in the face of an uncertain global economic outlook and tame domestic inflation.
The decision to cut rates to a record low of 5.50% by the bank's nine-member rate-setting committee, known as Copom, was unanimous. "The authority seems to reveal a bolder flight plan in terms of new stimuli ahead," Rabobank strategists wrote in a note. "Thus, we now look for two (instead of one) rate cuts of 50bp down the road, with Selic (overnight rate) ending the year at 4.50%."
Other Latin American currencies including Mexico's peso and Colombia's peso made marginal gains. MSCI's index of Latin American stocks increased marginally, helped by Brazil's Bovespa, which rose more than 1%, boosted by shares of state-run oil company Petroleo Brasileiro. Petrobras moved nearly 2% higher after the company hiked the average price of gasoline at refineries by 3.5% and the price of diesel by 4.2%, a company representative told Reuters.
Telecommunications firm Oi also gained, up 1.6%, after sources said it was in talks with Spain's Telefonica and Italy's Telecom Italia to sell its mobile network to avoid insolvency.