BRASILIA (Dow Jones)--The Brazilian real weakened against the dollar on Tuesday as investors' appetite for emerging-market currencies waned following Standard & Poor's announcement that adopted a negative outlook on 15 of the 17 countries sharing the euro.
The real weakened to BRL1.7895 to the dollar, from Monday's close of 1.7836, according to Tullett Prebon via Factset.
The warning from the credit ratings agency assigned a fifty percent chance of a downgrade in the next 90 days for the 15 euro-zone members, ending days of positive sentiment generated by hopes of an agreement between Germany and France regarding the euro area's financial crisis.
"It's a function of the global markets, how the U.S. and other markets are reacting to S&P," said Ilan Solot, a currency analyst at Brown Brothers Harriman in London. "At this point the dollar/real remains range-bound, but the risks are roughly balanced."
S&P said six of the seventeen countries in the monetary union could be downgraded by one notch, taking the triple-A rating of these countries including Germany, France and Belgium to AA, while the other nine countries on review risked a two-notch cut.
S&P will complete its review Friday, concurrently with a summit meeting at which euro-zone leaders will again try to solve the debt crisis.
The weaker real also follows a report in which Brazil's statistics agency said the economy stagnated in the third quarter.
Brazil's gross domestic product expanded 2.1% in the third quarter compared with the third quarter a year ago, the Brazilian Census Bureau, or IBGE, said Tuesday. That was below the 2.7% median forecast made by 14 economists polled by Dow Jones Newswires and down from year-on-year growth of 3.1% in the second quarter.
The economy failed to expand at all in the third quarter from the second quarter, remaining flat quarter-on-quarter, the IBGE said.
Source: http://online.wsj.com
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