Sun, Jun 15, 2014 - Page 13 News List

World Cup lovers packing extra dollars as real surges

Bloomberg

For foreign soccer fans swapping their dollars for reais as they arrive in Brazil for the World Cup, the tournament could hardly come at a worse time.

The real has gained 5.5 percent against the greenback this year, the most among 31 major currencies, making everything from hotels in Copacabana to Brazil’s signature caipirinha cocktails more expensive for foreign visitors.

Six months from now, when the tournament’s over, the currency is likely to be almost 7 percent cheaper at 2.4 to the US dollar, according to the median forecast of 28 strategists surveyed by Bloomberg.

“Planning the trip to Brazil has been a logistical nightmare,” said Joe Street, a 37-year-old New Yorker.

He anticipates spending about 40 percent more in Brazil than he did going to watch the World Cup in South Africa in 2010, citing the cost of everything from hotel rooms to airfares.

The 600,000 foreign fans that Brazilian government officials expect for the World Cup are getting squeezed as Central Bank president Alexandre Tombini intervenes in the foreign exchange market to prop up the real and curb inflation.

The Brazilian Tourism Ministry estimates foreigners will spend about 5,500 reais (US$2,460) each, plowing a total of US$1.5 billion into shops and restaurants.

The real climbed to a six-month high of 2.1832 per US dollar on April 10 and traded at 2.2395 at 10:13am in New York. That is down 0.4 percent from Thursday, when Brazil beat Croatia in the tournament’s opening match.

The currency’s gains this year follow three straight years of losses when it plunged 33 percent.

Soccer fans from Europe will find the euro 6.6 percent weaker versus the real this year, while British fans will get less for their money after the pound fell 2.9 percent against the Brazilian currency.

Policy makers have sold foreign-exchange swaps and dollar credit lines to support the real since August last year, when the currency fell to a five-year low of 2.4549 per US dollar.

The central bank extended its US$60 billion currency intervention program this month after inflation accelerated to 6.37 percent last month, approaching the 6.5 percent top of the country’s target.

The rally will turn into a slump as economic growth sputters and the current-account gap widens, according to strategists at HSBC Holdings PLC and Credit Agricole SA.

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