ForexSpace.com - Forex news, lead by Dow Jones, saw Brazil's use of Industrial Capacity Use (ICU) having fallen for a second consecutive month in March. Despite a continued recovery of industrial sales during the same period, the country’s National Confederation of Industries reported today that the March ICU stood at 81.5 percent versus 82.0 percent in February.

Meanwhile, forex traders and top forex brokers will have noted how Brazilian industrial employment was up 0.3 percent from February, and by 0.4 percent from March 2011, supporting CNI officials claims that the new data showed Brazil's economy beginning to show signs of recovery. CNI chief economist Flavio Castelo Branco said: "We can't say for sure yet that it's a tendency, but the numbers in March were positive and corroborate the idea that we'll see continued improvements in the second half of the year."

Brazil's central bank has cut the country's benchmark Selic interest rate by 3.5 percentage points since August to 9.00%. Additionally, the government this year has offered a series of tax incentives to local industries to spur production and increase exports.

Fears about Europe overshadowed Brazilian inflation data, also out today, that could raise doubts about room for further interest-rate cuts by the Brazilian Central Bank. National statistics agency IBGE says that the official IPCA consumer price index gained 0.64 percent in April, compared with a 0.21 percent rise in March. Brazil's jump in consumer prices last month likely signals the end to tame inflation there, says Nomura. It says a weaker real and lower base comparisons will likely mean the inflation rate accelerates later this year, though it "will likely remain low for the next few months due to seasonal factors." Nomura revises its year-end IPCA forecast to 5.2 percent from 5.1 percent.

Brazilian real currency's recent weakness has made it attractive, but it still may be too early to make bets on any appreciation, Barclays says. The bank says it remains "cautious" on the real, adding that "the global environment remains unsupportive for adding a long position." Heavy intervention by central bank caused real to depreciate to BRL1.90 range in recent weeks from BRL1.70 at end-February. Recent end to intervention, however, is positive, Barclays says. "The central bank has stopped its intervention, hinting that they are comfortable with a BRL1.85-BRL1.90 band," firm adds.

John Sullivan, analyst with Thomson Reuters, tells me that Brazilian traders are commenting how interest is now coming into the 2-yr DI market at 8.62 percent, stabilizing the BRL spot. “The use of the peso as a proxy hedge against FX positions in the Americas continues,” says Sullivan. “Today's April inflation report (3.41 percent y-o-y) leaves BanMexico on hold; 10 year rates at 6.46 percent (+9 pibs) continue to be attractive.”

Brazil's real accelerated losses at today’s open, trading around its weakest intraday levels since at least September as the future of the euro zone remains a top concern for investors and forex brokers.

Drew Hillier. Editor