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BRAZIL: BRL Continues Treads Water Following Late 2024 Interventions

BRAZIL
BulletEM BulletEmerging Market News
  • The Brazilian real has been consolidating this week, with USDBRL holding mid-range around 6.10 in early Thursday trade. The usual flurry of headlines from officials has been notably absent given the recess for congress, likely helping the most recent market stabilisation.
  • However, earlier in the week Finance Minister Haddad did admit that the administration has a communication problem, while President Lula replaced the communication head shortly after. BBVA note that going forward, actions will continue to speak louder than words, and the administration will have to demonstrate greater commitment to fiscal responsibility in order to inspire a firmer recovery in Brazilian assets.
  • In a latest poll of foreign exchange analysts conducted by Reuters, the Brazilian real is forecast to trade slightly stronger, at 5.94 per dollar in one year, according to the median estimate of 25 analysts polled Jan. 3-8. Bank of America have said it prefers to buy BRL/COP tactically on the back of positioning, flow seasonality and global factors.
  • For reference, Brazil's central bank sold nearly 10% of its reserves throughout the last three weeks of 2024 (shown below). The focus for the BCB turns back to inflation on Friday, where the annual IPCA reading is expected at 4.85%.
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  • The Brazilian real has been consolidating this week, with USDBRL holding mid-range around 6.10 in early Thursday trade. The usual flurry of headlines from officials has been notably absent given the recess for congress, likely helping the most recent market stabilisation.
  • However, earlier in the week Finance Minister Haddad did admit that the administration has a communication problem, while President Lula replaced the communication head shortly after. BBVA note that going forward, actions will continue to speak louder than words, and the administration will have to demonstrate greater commitment to fiscal responsibility in order to inspire a firmer recovery in Brazilian assets.
  • In a latest poll of foreign exchange analysts conducted by Reuters, the Brazilian real is forecast to trade slightly stronger, at 5.94 per dollar in one year, according to the median estimate of 25 analysts polled Jan. 3-8. Bank of America have said it prefers to buy BRL/COP tactically on the back of positioning, flow seasonality and global factors.
  • For reference, Brazil's central bank sold nearly 10% of its reserves throughout the last three weeks of 2024 (shown below). The focus for the BCB turns back to inflation on Friday, where the annual IPCA reading is expected at 4.85%.
image