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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
BRAZIL
- As noted, USDBRL climbed a further 1.18% on Monday, bringing YTD gains for the pair to an impressive 16.6%. Well known fiscal risks and the ongoing spat between the President and BCB Governor have ramped up the pressure on the Real in recent sessions, exacerbated by a deterioration in its technical profile following the break above 5.52.
- The moves could raise the risk of the BCB intervening, something that finance minister Haddad touched on overnight. Back in April, we reported how the BCB only intervenes by selling reserves or conducting additional swap auctions when it perceives dysfunctionality in the market, such as a lack of dollar liquidity or excessive volatility. At that juncture, the Real had declined 4.5% against the dollar in just one week, but importantly, spot remained much lower at around 5.27.
- It is significant that comments from Campos Neto in April described the depreciation as a "short-term movement" and mentioned that Brazil's improved trade balance has made the currency more stable in the longer term. Given the building negative momentum in recent weeks, it is likely this view may have changed.
- Additionally, in the words of the central bank chief, the ongoing confrontation makes the job of controlling inflation more difficult, as the sliding real causes expectations to further de-anchor. A cluster of late-2021 highs around 5.75 provides the next point of note on the USDBRL chart.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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