Brazilian President Dilma Rousseff’s administration estimates the real will strengthen beyond 1.80 per U.S. dollar this year, a government official with knowledge of internal discussions on the issue said. The government expects the euro region to start recovering from its current crisis in the second half of 2012, which will help weaken the dollar against other currencies, said the official, who asked not to be identified because the government doesn’t officially forecast currency moves. The real weakened 15 percent in the past six months, the third-worst performer among the 16 most-traded currencies tracked by Bloomberg, as the euro debt crisis prompted investors to eschew riskier assets. The decline in the real led the central bank in September to reverse its strategy aimed at stemming gains in the real that were hurting manufacturers. “Brazil has a better economic situation than other countries, receiving direct investment that can make a difference,� José Carlos Amado, a currency trader at DTVM Ltda, said in a phone interview. Amado expects the dollar to fluctuate between 1.75 and 1.85 reais this year. The U.S. currency could drop below 1.80 if the European crisis eases and the dollar inflow becomes positive, he said. Flows, Forecasts The real extended earlier gains rising 1.3 percent to 1.8332 per U.S. dollar today. The currency has gained 1.6 percent since the beginning of the year, the second-best performer after the Mexican peso among the 16 most traded currencies. Investors pulled $3.6 billion out of Brazil in December, up from $3.5 billion in November, according to the central bank. Analysts expect the real to strengthen to 1.77 per U.S. dollar by the end of the year, compared with 1.75 a week earlier, according to the median forecast in a central bank survey published today. Finance Minister Guido Mantega said Dec. 19 the government would take steps to prevent an “excessive� appreciation of the real to avoid harm to local industries. To contact the reporters on this story: Carla Simoes in Brasilia Newsroom at csimoes1@bloomberg.net. To contact the editor responsible for this story: Helder Marinho at hmarinho@bloomberg.net; Joshua Goodman at jgoodman19@bloomberg.net.

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