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BRAZIL: USDBRL Extends Gains, Long-End DI Swap Rates Rise Over 30bp

BRAZIL
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  • Brazilian assets remain under pressure ahead of the government’s bi-monthly fiscal report and DI swap rates continuing to underperform, particularly at the long-end. USDBRL is now up 1.4% on the session, rising back above the 5.50 pivot, while 5y swap rates have risen 35bp, taking total gains this week to over 55bp.
    • The rise in swap rates follows the start of a hiking cycle in Brazil on Wednesday and concerns that policymakers may yet step up the tightening pace in coming meetings, despite keeping their guidance open-ended. For a full review of the meeting see here.
    • Next week, focus will turn to the Copom minutes on Tuesday and quarterly inflation report on Thursday for further clues on the Selic rate path.
    • For USDBRL, a further reversal higher would refocus attention on resistance at 5.6917, the Aug 30 high.
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  • Brazilian assets remain under pressure ahead of the government’s bi-monthly fiscal report and DI swap rates continuing to underperform, particularly at the long-end. USDBRL is now up 1.4% on the session, rising back above the 5.50 pivot, while 5y swap rates have risen 35bp, taking total gains this week to over 55bp.
    • The rise in swap rates follows the start of a hiking cycle in Brazil on Wednesday and concerns that policymakers may yet step up the tightening pace in coming meetings, despite keeping their guidance open-ended. For a full review of the meeting see here.
    • Next week, focus will turn to the Copom minutes on Tuesday and quarterly inflation report on Thursday for further clues on the Selic rate path.
    • For USDBRL, a further reversal higher would refocus attention on resistance at 5.6917, the Aug 30 high.