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BCB Curb Real Losses

BRAZIL

The removal and replacement of the Petrobras CEO by President Bolsonaro has once again sparked investor anxiety and subsequent outflows of local assets. The local swaps curve finished yesterday around 20 basis points higher in the belly and the long end, while the Ibovespa closed down nearly 5%.


A couple of interesting things to note in the currency. After opening down 2%, measures were taken to curb the depreciation. USD1.6Bn in FX Credit Line and the 20k (USD1bn equivalent) of FX Swaps auctioned helped to fade half of the day's move.


We highlighted overnight, JPMorgan recommended going short USDBRL as the bulk of negative newsflow on the fiscal side may be in the price, as well as likely BCB intervention via fx swaps and likely rate hikes.

  • USDBRL made a new marginal high yesterday at 5.5326 but immediately failed to consolidate above the 5.50-5.52 resistance band.
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