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22 Apr 2015
Upside capped in USD/BRL? – Scotiabank
FXStreet (Edinburgh) - In the opinion of Eduardo Suarez, Chief FX Strategist at Scotiabank, gains in the pair could be limited by BCB moves.
Key Quotes
“USD/BRL has been the second best performing EMFX so far in April (+3.1%, which makes it second best to the RUB which is up +13.8%)”.
“However, we think that additional upside may be capped by a potential unwind of BCB swaps”.
“The BCB has US$112bn in outstanding swaps it used to support the BRL over recent months, and our sense is that if the BRL keeps appreciating, the central bank would likely use the rally to start unwinding them as they “come due”. This could cap the upside to the real”.
Key Quotes
“USD/BRL has been the second best performing EMFX so far in April (+3.1%, which makes it second best to the RUB which is up +13.8%)”.
“However, we think that additional upside may be capped by a potential unwind of BCB swaps”.
“The BCB has US$112bn in outstanding swaps it used to support the BRL over recent months, and our sense is that if the BRL keeps appreciating, the central bank would likely use the rally to start unwinding them as they “come due”. This could cap the upside to the real”.