USD/BRL seen at 5.25 by year-end – Rabobank
11.07.2022, 16:33

USD/BRL seen at 5.25 by year-end – Rabobank

Emerging market currencies are under pressure on Monday; the USD/BRL is up by 1.85% at 5.35. Since June, the pair has been rising constantly. Analysts at Rabobank see the USD/BRL ending the year around 5.25. 

Key Quotes: 

“After the Fed released the latest FOMC meeting’s minutes, two Fed hawks said they would slow pace after July’s meeting decision while June’s payrolls surprise to the upside again. Domestically, June’s CPI inflation starts to show the temporary fuel-taxes cut impact of the recently approved PLP18 bill, but the key vote on the social benefits bill was postponed to next week. Over the week, the DXY dollar index appreciated 1.8%, the USDBRL ended up appreciating 1.5% (although it closed the week at 5.2559, the same level of 30 June), the Ibovespa rose 1.4%, while the local inverted yield curve steepened.”

“We still see a 50-bp hike at the August meeting, then likely staying put until yearend. Even though we expect a longer Selic hiking cycle than at the beginning of 2022, we believe the Fed’s recent display of hawkishness and the intensification of the traditional electoral cycle will end up weighing on the BRL and other local assets going forward. By year-end we expect the BRL to trade at 5.25.”
 

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