BRASILIA: Brazil's current account deficit in the year to January as a share of the overall economy shrank to its smallest in 13 years, official figures showed on Wednesday, thanks mainly to a decline in the primary income and services deficits in the month.

The current account deficit of 0.65% of gross domestic product in the 12 months to January was down from 0.87% the previous month and the smallest since February, 2008, central bank figures showed.

A combination of an exchange rate depreciation of more than 30% in the year to January and a shrinking trade deficit driven largely by a steep fall in imports over the last year has helped deliver Brazil's more favorable balance of payments position.

Robin Brooks, chief economist at the Washington-based Institute for International Finance, says the real at current levels of around 5.40 per dollar is undervalued, and the "modest" current account deficit and "solid" capital inflows point to fair value around 4.50 per dollar.

Brazil's current account deficit in the month of January was $7.25 billion, the second deficit in a row and slightly less than the $7.75 billion shortfall forecast in a Reuters poll of economists.

It was significantly smaller than the $10.3 billion deficit from the same month last year, as the trade deficit shrank to $1.9 billion from $2.5 billion. The services deficit shrank almost 60% to $1.0 billion, the smallest in 12 years.

Foreign direct investment in January totaled $1.8 billion, the central bank said, less than the $2.8 billion forecast in a Reuters poll.

Based on partial data so far for February, the central bank expects FDI to total $6.5 billion this month and a current account deficit of $2.3 billion this month.

Net portfolio investments into Brazil totaled $6.2 billion in January, the eighth consecutive month of inflows, the central bank said. Of that, $4.7 billion went into stocks, and $1.5 billion in debt securities.