US Dollar Rally
Brazil's real off six-year low after the 50 bps selic rate hike. Reuters

Brazil's real has strengthened, moving off a six-year high hit earlier in November, as the central bank raised the benchmark interest rate in order to curb inflationary pressures.

The real has been higher against the dollar so far in the month after ending the past three months weaker due to a broadly rallying greenback.

The USD/BRL ended Wednesday at 2.5558, from the previous close of 2.2738, and compared to the 14 November peak of 2.6292, its highest since December 2008.

The Central Bank of Brazil raised "selic rate", the benchmark interest rate, by half a point to 11.75% citing high inflation and falling currency, despite slowing growth.

Traders said a rate hike was expected as the minutes of the last meeting had revealed the policymakers' concerns about persistently high inflation.

But the margin of hike was bigger than expected by many analysts. The four hikes already effected this year were all by 25 basis points. And the big hike right after the election shows the new government's aggressiveness in fighting inflation, some market participants say.

Inflation in Brazil has been above the official target of 4.5% (with 2 percentage points tolerance) since June, thanks to an increase in consumer and government spending, wage growth and the depreciation of the real.

Brazil's new finance minister Joaquim Levy is known for strict austerity measures and is credited with a surplus budget when he was treasury secretary under former president Lula da Silva.