Fed Decision Sends Brazil's Currency Lower

  • Playlist
  • Download
  • Embed
    <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

When the Federal Reserve announced it had a plan to taper U.S. economic stimulus measures, shockwaves were felt across financial markets overseas. Anticipation of the Fed's action has sent Brazil's currency tumbling in one of the world's most important emerging markets.



We'll begin NPR's business news with collapsing currencies.

Over the past several months, the focus of financial markets has been the Federal Reserve's plan to phase out or taper some of the extraordinary measures it has taken to stimulate the economy.

Just the idea that the Fed might start dialing back on stimulus spending is rippling through financial markets overseas. For instance, investors who once poured money into emerging markets, like Brazil and India, are suddenly much more cautious.

We'll hear about India's problems in a moment. But first, NPR's Lourdes Garcia-Navarro explains how anticipation of the Fed's action has sent the currency tumbling in Latin America's biggest economy.

LOURDES GARCIA-NAVARRO, BYLINE: In a bid to stop the slide of the real against the dollar, Brazil last week launched a $60 billion currency intervention. While other emerging economy currencies have also been hit hard, Brazil is in a particularly difficult spot.

Luiz Rabi is an economist with Serasa Experian.

LUIZ RABI: (Foreign language spoken)

GARCIA-NAVARRO: Brazil was one of the economies that wasn't adequately prepared to face what's happened in the American markets, he says. Brazil already had high inflation, there's no space to absorb price increases due to the devaluation of the currency, he says.

Brazil has struggled to keep its inflation within target levels and a devalued real means imports are more expensive, which in turn means people will pay more for things like gasoline, which is subsidized by the government, but also bread. Brazil is one of the top wheat importing countries in the world.

Rabi says despite the new government measures though, the real probably won't regain its previous strength anytime soon.

Lourdes Garcia-Navarro, NPR News, Sao Paulo.

Copyright © 2013 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR’s programming is the audio.



Please keep your community civil. All comments must follow the Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

NPR thanks our sponsors

Become an NPR sponsor

Support comes from