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BRASILIA, March 12 (Reuters) - Brazilian markets got battered on Thursday, with stocks diving 16% and the currency touching a historic low as fears over economic damage from the global coronavirus pandemic triggered a selloff.
The real fell below 5.00 per dollar for the first time ever , extending losses this year to as much as 20% and prompting another round of dollar-selling intervention from the central bank.
Stock market trading was halted twice as the Bovespa index plunged 16%, extending its decline this year to 38%, or in dollar terms, a staggering 47%.
Around midsession, the Bovespa index was down 16.2% at 71,406 points and the real had recouped much of its losses to trade at 4.86 per dollar, although it was still down around 1% on the day.
Brazil's currency and stocks are among the worst-performing this year, with the Bovespa firmly on track for its biggest quarterly fall since the Real Plan to kill off hyper-inflation in Brazil was introduced in 1994.
The volatility spread to fixed income and rates markets. Longer-dated rates futures jumped as much as 100 basis points to the highest in almost a year as traders bet the central bank will eventually be forced to jack up interest rates to protect the currency and maintain capital inflows from abroad.
"Things can get worse before they get better," said Rico Investimentos, a brokerage in Sao Paulo.
Currency market volatility soared, with one-month dollar/real implied volatility reaching 23.8% and 3-month implied volatility scaling 20%, both the highest since October 2018 .
In an effort to calm the market, the central bank auctioned $3.5 billion of dollar reserves, although it only accepted bids for $2.5 billion. The central bank also coordinated with Treasury to hold a series of bond auctions and buybacks in the coming week.
Traders also noted that a deterioration in the domestic political scenario, marked by a shock Congressional vote on government spending late on Wednesday, also soured investor sentiment on Brazil.
"Such a serious setback for the reform agenda along with a more-than-challenging global backdrop will keep Brazilian local assets under pressure in the weeks to come," Morgan Stanley wrote in a note to clients on Thursday. (Reporting by Jamie McGeever; editing by John Stonestreet and David Gregorio)