By Ben Tavener
SAO PAULO
The real weakened nearly 3 percent against the dollar Friday to a near-13-year low, amid ongoing political and economic uncertainty that is draining investor confidence in Latin America's largest economy.
After opening the day at 3.76 reais, the currency fell 2.7 percent against the dollar, which bought 3.86 reais at Friday's close -- the most since October 2002.
The results mean the dollar has strengthened 7.6 percent this week. It is also up 45 percent this year and 72 percent in the past 12 months against the real.
The most recent forces driving the real's depreciation include uncertainty about the government's ability to plug a gap in a 2016 budget it presented Monday with a 30.5 billion real ($8B) shortfall -- the first time a Brazilian government has proposed a budget with a primary deficit.
Failure to bridge the gap would jeopardize Brazil's prized investment-grade rating, which, if lost, would bar many foreign funds from investing in Brazil.
Labor market data from the United States that was released Friday also dampened the real's fortunes, according to the Folha de S.Paulo newspaper. The results signal an upcoming hike in interest rates in the world's largest economy is likely, which would in turn lead to a more expensive dollar and the withdrawal of investments from Brazil and other emerging economies.
Brazil's central bank also revealed Friday that Brazilians had taken nearly 50 billion reais ($13 billion) out of savings so far in 2015, which analysts blamed on creeping joblessness and inflation in recent months, as well as tax hikes.
Brazil's economy is now formally in recession after second quarter results for 2015 released last week showed the economy had contracted for two consecutive quarters. Economists currently predict the GDP will contract by 2.26 percent this year and 0.4 percent in 2016.
There is also concern about whether Brazil's pro-austerity finance minister, Joaquim Levy, will continue in his role, despite repeated reassurances he has the government's full backing.
A political crisis is also gripping the country, with politicians and commentators alike casting doubt over President Dilma Rousseff's ability to govern effectively, given the current lack of trust and confidence between the Planalto and Congress.
Comments by Vice President Michel Temer were interpreted as hinting that Rousseff's future at the helm looked shaky. He drew attention to the president's single-digit approval rating in remarks that filled Friday's headlines.
"No one is going to survive three-and-a-half years with this low (approval) rating," Temer said at a political debate attended by business and academic figures Thursday evening. But he added that an improvement in the economic scenario could see Rousseff's approval rating "end up returning to a reasonable level".
Government figures and some in Temer's party -- the Brazilian Democratic Movement Party (PMDB) which is part of Rousseff's ruling coalition and is Brazil's largest political movement -- distanced themselves from the vice president's comments. But it was seen as yet another signal that the PMDB, which has not fielded a presidential candidate since 1994, could be maneuvering to run without the president's Workers' Party in 2018.
