Brazilian real closes at historic low of 4.166 to the dollar

Brazil's battered real closed at a historic low of 4.166 to the US dollar Thursday after the central bank surprised markets by not raising interest rates.

The currency, weakened by worries over recession and political uncertainty in Latin America's biggest economy, was 1.49 percent down on the day, at one point trading even lower at 4.17 to the dollar. The previous record low close was in late September at 4.145 real.

Brazil is in its worst recession since the 1930s and is forecast by the IMF to stay in negative growth through 2017.

Inflation is now over 10 percent, but on Wednesday the central bank left the key interest rate unchanged, opting against an increase that could have put a new brake on the world's seventh biggest economy.

The bank's decision to leave the benchmark Selic rate at 14.25 percent -- citing "increased domestic and particularly external uncertainties" -- surprised many in the markets.

"Without doubt the fall in the real is due to this decision because investors are actively looking for ways to protect themselves against inflation and that includes the dollar," Paulo Gomes, economist at Azimut Brasil Wealth Management, told AFP.

Brazil has been hit hard by the slump in commodity prices, including the plunge in oil values.

Worsening the outlook, the country is in the grip of a sprawling corruption scandal centered on the giant state oil company Petrobras. Meanwhile, President Dilma Rousseff is fighting an impeachment attempt that claims she fiddled government accounts during her 2014 reelection campaign.

Brazil closed 2015 with inflation of 10.67 percent, far over the target of 6.5 percent.