EMERGING MARKETS-Brazil's real drops sharply on Levy comments
SAO PAULO Jan 30 (Reuters) - The Brazilian real weakened about 2.5 percent against the dollar on Friday after Finance Minister Joaquim Levy suggested the government had no intention of keeping the currency stronger than the market would naturally dictate.
Speaking to investors and business leaders at an event in Sao Paulo on Friday, Levy suggested the real was overvalued and signaled the government will not work to keep the currency from sliding.
The real added to early losses shortly afterward, dropping as low as 2.68 to the dollar.
Finance ministry officials later said Levy was not referring specifically to the real, but to world currencies, although traders shrugged off the clarification.
Brazil's government has intervened in the currency market over the last year and a half in order to prevent weakness in the real, which raises the relative price of imports and contributes to already-high inflation.
Now, President Dilma Rousseff's administration has pledged better fiscal discipline and less patchwork policymaking.
"The government is rolling back intervention measures in various areas," said Francisco Carvalho, currency manager at brokerage BGC Liquidez in Sao Paulo.
"It seems that the government will also be more passive in relation to the exchange rate." (Reporting by Bruno Federowski; Editing by Bernadette Baum)
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