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19 Mar 2015
Outlook for the Brazilian real remains neutral – BAML
FXStreet (Edinburgh) - In the view of analysts at BAML, domestic factor will remain the main drivers for the Brazilian currency in the near term
Key Quotes
“We maintain our neutral view on BRL. Our regression exercise shows that global factors are relatively less important for the Brazilian real”.
“It is the domestic factors, including the Petrobras scandal, fiscal accounts, energy rationing and central bank policy, that will be of first order importance for BRL performance in coming months”.
“While BRL is rapidly approaching its equilibrium level, the mounting domestic uncertainties and high realized volatility suggests the exchange rate could easily overshoot its fair value in the near term, before mean reverting”.
“The market will now focus on what the Brazilian Central Bank (BCB) decides regarding currency intervention. The current program, whereby BCB auctions $100mn of currency swaps every day, is set to expire at end-March”.
“It looks like the authorities are ready to let the program end since the anti-inflation plan now relies more on interest rate policy and improving the primary fiscal balance”.
Key Quotes
“We maintain our neutral view on BRL. Our regression exercise shows that global factors are relatively less important for the Brazilian real”.
“It is the domestic factors, including the Petrobras scandal, fiscal accounts, energy rationing and central bank policy, that will be of first order importance for BRL performance in coming months”.
“While BRL is rapidly approaching its equilibrium level, the mounting domestic uncertainties and high realized volatility suggests the exchange rate could easily overshoot its fair value in the near term, before mean reverting”.
“The market will now focus on what the Brazilian Central Bank (BCB) decides regarding currency intervention. The current program, whereby BCB auctions $100mn of currency swaps every day, is set to expire at end-March”.
“It looks like the authorities are ready to let the program end since the anti-inflation plan now relies more on interest rate policy and improving the primary fiscal balance”.