Brazil’s real declined from its highest level in two weeks after Moody’s Investors Service cited rising debt and weak growth in lowering its outlook on the nation’s credit rating to stable from positive.

The real depreciated 0.3 percent to 2.1991 per U.S. dollar at 9:57 a.m. in Sao Paulo. The currency rallied yesterday to 2.1917, the strongest level since Sept. 18. Swap rates on the contract due in January 2015 fell 14 basis points, or 0.14 percentage point, to 10.13 percent today.

Brazil’s government debt will probably stay at about 60 percent of gross domestic product, higher than the 45 percent median for its peers, Moody’s said yesterday in reducing the outlook on the nation’s Baa2 rating, the second-lowest investment grade. The central bank trimmed its 2013 economic growth outlook to 2.5 percent from 2.7 percent this week.

“This should help restrain some of the real’s appreciation,” Marco Antonio Caruso, an economist at Banco Pine SA, said by phone from Sao Paulo. “We haven’t seen any change in the structure of Brazil’s economy, and Moody’s action is one more sign of this.”

Latin America’s largest economy expanded less than forecast by analysts in five of the past six quarters. Industrial output unexpectedly stalled in August as factories reduced output of consumer goods. Inflation has twice broken the 6.5 percent upper limit of the central bank’s target range this year.

‘Credit Metrics’

Moody’s also cited the recurrent lending by the Treasury to Brazil’s public banks as well as the “deterioration in reporting quality of the government accounts” for its decision. The credit rating is the same level as Peru, Italy and Kazakhstan, and one step below that of South Africa, Mexico, Thailand and Russia.

“Even though there are signs that the Brazilian economy may be starting to recover, Moody’s view is that, if and when the upturn materializes, it is unlikely that it will be strong enough to restore a positive trend in Brazil credit metrics,” Moody’s said in a statement yesterday.

In June, Standard & Poor’s reduced its outlook on Brazil’s rating from stable to negative, citing sluggish growth and expansionary fiscal policy.

The real has rallied 11 percent since Aug. 22, when the central bank announced a $60 billion program to bolster the currency and curb inflation. The gain is the biggest among all of the world’s currencies tracked by Bloomberg.

Brazil has raised the target lending rate by 1.75 percentage points to 9 percent from a record low 7.25 percent in April, the fastest pace among 49 major economies tracked by Bloomberg. The central bank is next scheduled to meet Oct. 8-9.

Policy makers will work to bring inflation as close to target as possible next year, central bank President Alexandre Tombini said in an interview in London yesterday.

Bloomberg