VIEW: Goldman Sachs notes that.......>

BRAZILIAN REAL: VIEW: Goldman Sachs notes that "the Real continues to be the

worst-performing EM currency in 2020: even after a significant retracement in

global risk sentiment since late March, BRL stands more than 20% weaker versus

the Dollar since the start of the year. Given the high "beta" of the cross to

global risk sentiment, USD/BRL could indeed move lower on a sharp weakening in

the broad Dollar. But, as we have emphasized, much of the weakness in BRL this

year has been justified: even setting aside the record-setting GDP contraction

in April, continued struggles to contain COVID domestically, ongoing tensions

between the President and the court system, and the possibility of additional

cuts to the Selic rate below an already record-low level of 2.25% mean that the

Real features an unattractive combination of high domestic risks and low carry.

In other words, to a greater extent than its EM FX peers, the case for BRL longs

depends on weakness in the broad Dollar, and the rewards for BRL longs may, in

practice, undershoot some of the "room for retracement" measured on statistical

screens."