19 Feb 2015
USD/BRL rises 1%, approaches multi-year highs
FXStreet (Córdoba) - The brazilian real (BRL) is falling sharply in the market and is the worst performer among Latin America's currencies on Thursday amid worries about Brazil’s economy. USD/BRL climbed to 2.8686 reaching the strongest level since last week when it hit at 2.8780 a 10-year high.
The real resume the decline against the US dollar on Thursday after holding steady around 2.8300 the previous days.
A negative outlook
According to the Emerging Market Currency Strategy Team at Brown Brothers Harriman, investors remain very negative on Brazil but they note that positioning seems very one-sided, opening the doors for short-covering rallies in the real on positive headlines.
“Yet the fundamental backdrop will not turn around quickly, giving investors a long window this year to decide on whether or not Levy (Minister of Finance) and Rousseff (President) have done enough to turn the ship around. Downgrade risk remains high, as our model shows Brazil right at the cusp of a BB+ rating. If the fiscal numbers don’t improve soon, then the agency honeymoon for Levy will end”, explained the BBH Team.
The real resume the decline against the US dollar on Thursday after holding steady around 2.8300 the previous days.
A negative outlook
According to the Emerging Market Currency Strategy Team at Brown Brothers Harriman, investors remain very negative on Brazil but they note that positioning seems very one-sided, opening the doors for short-covering rallies in the real on positive headlines.
“Yet the fundamental backdrop will not turn around quickly, giving investors a long window this year to decide on whether or not Levy (Minister of Finance) and Rousseff (President) have done enough to turn the ship around. Downgrade risk remains high, as our model shows Brazil right at the cusp of a BB+ rating. If the fiscal numbers don’t improve soon, then the agency honeymoon for Levy will end”, explained the BBH Team.