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31 Aug 2015
Brazilian real poised for further weakness – BBH
FXStreet (Edinburgh) - Analysts at BBH expect the Brazilian currency to lose further ground in the next months.
Key Quotes
“The real is the worst performer this year in EM, down 27% YTD. The next worst are COP at -23% and TRY at -20%”.
“A new cycle high near 3.68 was established today, and the pair should eventually test the all-time high near 4.0 from October 2002. Indeed, we see a risk of an overshoot that establishes new all-time highs for this pair above 4. Our EM FX model taps BRL to underperform in EM over the next three months”.
“Meanwhile, COPOM meets Wednesday and is expected to keep rates steady at 14.25% after hiking at every meeting since last October. We think there is a small chance of a hawkish surprise here, as inflation and inflation expectations continue to rise. However, higher rates have so far done nothing to support the currency and so the central bank may be tempted to stand pat”.
Key Quotes
“The real is the worst performer this year in EM, down 27% YTD. The next worst are COP at -23% and TRY at -20%”.
“A new cycle high near 3.68 was established today, and the pair should eventually test the all-time high near 4.0 from October 2002. Indeed, we see a risk of an overshoot that establishes new all-time highs for this pair above 4. Our EM FX model taps BRL to underperform in EM over the next three months”.
“Meanwhile, COPOM meets Wednesday and is expected to keep rates steady at 14.25% after hiking at every meeting since last October. We think there is a small chance of a hawkish surprise here, as inflation and inflation expectations continue to rise. However, higher rates have so far done nothing to support the currency and so the central bank may be tempted to stand pat”.