Brazil Reforms Help Curb U.S. Fed Hike Impact on BRL: Votorantim
(Bloomberg) -- BRL’s outperformance after the Fed signaled tighter policy is partially due to investors’ perception that Temer government reforms keep advancing, Roberto Padovani, an economist at Banco Votorantim, says in a phone interview.
- Reforms are an “anchor” for the positive sentiment
- The evidence that BRL has already dropped excessively in the past year also helps to buoy the currency
- Brazil 5-Y CDS stabilizing ~300 points also shows a perception that, despite recent political noises, there is no sign of a populist shift in Brazil
- “The more the global risk increases, the more good domestic fundamentals are needed”
- Even with reforms, a higher U.S. rate points to a stronger USD globally, making 3.40 a “good reference” for BRL in the near term
- NOTE: BRL fell 33% in 2015, second-worst EM currency, capping the 5th year of losses in a row; as of Dec. 15, BRL is the 3rd-best performer among 24 main EM peers
Alert:
HALISTER1Source: BFW (Bloomberg First Word)
People Roberto Padovani (Banco Votorantim SA)
Michel Temer (Federative Republic of Brazil)
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