Rio De Janeiro/BLOOMBERG
The Brazilian real became more volatile as the government tries to push Congress to pass a proposed tax increases to avoid other levies that could further weigh on economic growth.
One-week implied volatility surged 0.6 percentage point to 19.24 percent, the second-highest among the worldâ€™s 16 most- traded currencies. The real slumped 0.2 percent to 4.0059 per dollar in Sao Paulo.
President Dilma Rousseff threatened to seek other tax increases should Congress fail to approve a levy on financial transactions, O Globo reported. She said spending cuts have reached their limit and without the financial tax, the government would be forced to boost revenue by boosting existing levies.
“Rousseffâ€™s threats add to political tension that could keep sidetracking her economic agenda,” said Joao Paulo de Gracia Correa, a foreign-exchange director at SLW Corretora de Valores in Curitiba, Brazil. “It is quite a challenge to support the economy and at the same time deal with the fiscal situation, and we see volatility increasing.”
With retail sales falling more than forecast in December as a two-year recession erodes Braziliansâ€™ purchasing power, tax hikes could further dent buyersâ€™ appetites, he said.