Brazil's shot at a controlled currency devaluation would be put to a stiff test when trading began opening around the globe, analysts said. "Thursday is going to be another very nerve-racking day," said Constantin Jancso of MCM Consultores in Sao Paulo. US dollars poured out of Brazil on Wednesday -- the losses were widely seen at more than $1 billion. Unless the tide turned, Brazil could simply run out of cash to defend the real currency, the cornerstone of four rare years of economic growth and low inflation.

Brazil's Central Bank devalued the local real currency on Wednesday, scrapping a mini-band within which the real traded against the dollar and pegging it instead within a new, wider maxi-band.

The real plunged quickly to the new band's outer limit, down more than 8 per cent from Tuesday's close at 1.32 to the dollar. The dollar itself fell against the euro amid fears that Brazil might tip Latin America into recession, hurting US exports.

Shares in Europe were down, too. Markets had long considered the real overvalued, perhaps by as much as 20 per cent. But keeping the currency strong was a mantra of President Fernando Henrique Cardoso's government.

Stunned investors were also unnerved on Wednesday by the resignation of Central Bank President Gustavo Franco, one of the mentors of Brazil's new-found economic stability who quit rather than put into practice a devaluation he opposed.

Brazil's reserves -- the country's best means of defending the real currency -- stood at about $45 billion, already down about $3 billion so far this month, according to market calculations.

US President Bill Clinton said on Wednesday he was monitoring closely the situation in Brazil, adding that his administration was working with the Brazilian government.

Japan added its voice to the growing chorus of concern about the possible impact on global growth should the world's eighth largest economy collapse. Japanese Finance Minister Kiichi Miyazawa said the International Monetary Fund and the G7 nations should be able to devise a solution to Brazil's problems.

"I believe everyone can reach an agreement so that the crisis does not spread," Miyazawa said. Unlike November, when the International Monetary Fund and the world's rich nations saved Brazil with a huge credit lifeline amid fallout from Russia's crisis, this time there seemed few options of outside help.

IMF managing director Michel Camdessus issued a statement late on Wednesday urging Brazil to keep on pushing for spending cuts to meet fiscal targets agreed in return for rescue loans. Market-watchers said the country's likelihood of holding the real at its new rate against the US dollar remained at the mercy of nervous capital flows, and now Brazil's once-predictable policy of keeping the real strong had vanished.

"The markets are likely to want to put Brazil's new foreign-exchange policy to the test now," said Jose Carlos Faria, senior economist with ING Bank in Sao Paulo.

"The Central Bank has given in once, it could give in again," he said.