Brazil's real weakened past the psychological barrier of BRL1.90 to the U.S. dollar Monday as risk aversion grew worldwide and investors shied away from the Brazilian currency in particular amid fears of possible further government intervention in the market.

The real exited usual trading at BRL1.9047 to the dollar, weaker than its Friday close of BRL1.8837, according to Tullett Prebon via FactSet.

Spain's entry into recession and the downgrading of both Spain and a number of Spanish banks by Standard & Poor's renewed fears over the European economy, dampening risk appetite and leading the dollar to strengthen on international markets.

Spain officially entered recession after first-quarter data released Monday confirmed that its economy contracted for the second consecutive quarter. The government announced it will raise spending cuts to EUR20 billion, from the previously announced EUR10 billion.

Expectations of anti-austerity protests grew amid fears that Spain's already towering 24.4% unemployment rate could rise even more.

However, sentiment among investors in the real was also hit by expectations that the Brazilian Central Bank will continue to take measures to "correct" the real's value, stemming any possible appreciation, following no fewer than 16 interventions during April via spot dollar purchase auctions. This fear explains why the real fell more than other Latin American currencies Monday, said Bruno Lavieri of Tendencias consultancy.

"Other Latin American currencies are more diversified," Lavieri said. "Brazil's central bank is acting very close to the market and the government's talk shows it could continue to pay an intensive role."

The recent easing of inflationary pressures in Brazil has given Brazil's central bank more freedom to take measures in the currency market, noted Lavieri. "However, a devalued real tends to pressurize inflation, so if inflation starts accelerating again, then the central bank's intervention framework may change," he said.

Inflationary pressures are also linked to commodities prices, which for the time being look set to remain depressed, according to the Tendencias economist. 

For Flavio Serrano, economist with Espirito Santo Investment Bank, investors in the real "are prisoners to the will of the central bank," which spells more uncertainties for the coming days. The central bank has "made it quite clear they don't want the exchange rate at BRL1.70, the rate of earlier this year," Serrano said. "Investors are afraid. The direction of the dollar has been only upwards and there's doubts where this will stop: they may only stop when inflation starts taking off." 

Monday's trading may have been particularly volatile as this was the last day of the month, when the central bank sets its official exchange rate for the month, which usually leads to speculative trades, the economists said. In addition, thin training on the eve of the Labor Day holiday Tuesday, when Brazil's markets will be closed, may have added to the volatility, they said.