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WPI Reports Sharp Drop in the Value of the Brazilian Real as Recession Bites

Tumble Takes Place as Recession Bites


London, UK -- (ReleaseWire) -- 10/15/2014 --World economics are showing a decisive downtick, according to The World Price Index (WPI). The information is collected by World Economics, which is devoted to producing investigation, insight and data that offer perception into the activity in the global economy.

Released on the 2nd working Tuesday of each month, the index is reporting that the German euro fell to only 4% overvaluation in October, the Chinese Yuan undervaluation hit 15% and the Russian Rouble hit a discouraging 11% undervaluation. One dramatic change was the relative overvaluation of the Brazilian Real, which dropped to 23.5%, for a total decline of 11.8%, when measured against the U.S. Dollar in October.

The WPI rate of 2.99 Brazilian Reals to the U.S. dollar is higher than the official rate of 2.42. From February through September, the relative value of the Real rose. By all measures, the decline in October can be attributed to the fact that Brazil's trade figures for September included a recorded trade deficiency of $939 million. What this means is that for several consecutive months of surplus; the October low point looks incongruous.

The fate of the Brazilian Real lies in part in the hands of the country's Central Bank Governor. According to WPI, it is unlikely that interest rates will be lowered right away. The presidential election will also have its part in effecting the Brazilian currency's pathway. The newly elected president and administration could potentially alter the fiscal or monetary policy.

The World Economic Sales Managers' Index had expected a recession in Latin America since the end of 2013, with Brazil's economic condition having a major impact on that outcome. Since September a year ago, business confidence has declined more each month. The FIFA World Cup 2014, which was held in Brazil, seems to have stalled the decline in the gross domestic product.

About World Economics
World Economics is an organization dedicated to producing analysis, insight and data relating to questions of importance in understanding the world economy.