Brazilian Real Plunges Amid Tax Proposal Controversy

The Brazilian real fell to record lows due to market concerns over government tax proposals, which include unexpected income tax reforms. Despite measures to calm markets, volatility is likely to continue. The central bank may intervene, while fiscal responsibility remains a key government focus.

The Brazilian real plummeted to all-time lows on Friday, spurred by investor apprehension about the government's newly proposed tax structure within its broader spending cuts plan. This marks the third consecutive session of sell-offs, leading to calls for central bank intervention.

Early Friday saw the currency dip to 6.11 per dollar before a partial recovery to 6.03 by midday. The government's recent policy package aims for more than 70 billion reais in savings over two years but failed to ease budgetary gap worries.

Unexpected tax reforms within the package caused rapid devaluation, with some urging central bank action. Analysts suggest potential aggressive interest rate hikes as fiscal stability is questioned. While fiscal responsibility remains a non-negotiable for government officials, market volatility persists.

(With inputs from agencies.)