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Fiscal Fears Return To Pressure BRL

BRAZIL
  • BRL weakness has largely stemmed from uncertainty relating to the government's proposal to boost the Bolsa Familia cash transfer program.
  • The report from CNN Brasil that the average program payout will be 400 reais ($76), above the previous estimate of 300 reais, generated volatility in the exchange rate on Monday, amplifying fears about Brazil's worsening fiscal situation and the risks to the spending ceiling.
  • It is worth noting that in a statement, the government said it had not discussed Bolsa Familia amounts at a meeting with congressional leaders that day.
  • This morning Minister Guedes has assured that Brazil to keep recurring expenses within spending cap.
  • The BRL continues to have the highest implied volatility among all the 27 major currencies tracked by Bloomberg, with one-month at 16.80%.
  • Most notable resistance comes in at 5.3130, the Jul 8 high which coincides with levels where the BCB last intervened.
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