Brazil's Currency Sinks After Fitch Cuts Rating To Junk Status

The Brazilian real dropped sharply Wednesday after Fitch Ratings cut the country's credit to BB+, widely considered junk status, from BBB-. The real was slammed 1.1% lower against the dollar. The downgrade "reflects the economy's deeper recession than previously anticipated, continued adverse fiscal developments and the increased political uncertainty that could further undermine the government's capacity to effectively implement fiscal measures to stabilize the growing debt burden," wrote Shelly Shetty, head of Latin American sovereign ratings at Fitch. Brazil's rating could be downgraded further in part if a prolonged recession "further undermines government debt dynamics and stokes political and social instability," said Fitch.