Halister News

(Bloomberg) -- (Translated by Google and reviewed by Bloomberg editors.)

• The risks of a depreciation of Brazil’s real are somewhat contained due to the structural improvement that has occurred over the last year, with very solid external accounts, very low inflation, activity recovering and a certain improvement in the medium-term fiscal situation, due to the approval of the spending ceiling bill, says Nomura strategist Joao Pedro Ribeiro in a telephone interview
• Nomura continues to see the trend of depreciation of the real until the end of the year, with some risk associated with disappointment with fiscal numbers and with the potential for approval of the pension reform, which may not be properly reflected in the exchange rate
  • BRL/USD behavior has reflected fairly favorable external environment for emerging markets and good domestic news, such as labor reform approval, lower inflation and some optimism with a smaller chance of the "Lula scenario" in 2018
• Ribeiro sees no change in the central bank’s performance in terms of exchange rate, given the current level of stocks of swap
• NOTE: Nomura maintains a BRL projection at BRL3.40/USD at the end of 2017 and at BRL3.50/USD at the end of 2018
• Fiscal situation is quite complicated and there are risks in the short term to fiscal numbers, in addition to uncertain political scenario, which are relevant to the central bank with regard to monetary policy, he said
• Nomura works with "no pension reform" scenario
• S&P downgrade possible over the next 30 days
• Probability of cutting Selic by 100bps at next week’s monetary policy cmte meeting is "quite high"
  • June conditions here favored maintaining the pace of cuts, with inflation and inflation expectations down, in addition to exchange rate appreciation
  • NOTE: Nomura sees Selic at 8% at the end of the year

Original Story: Nomura: Risco de alta do dólar é contido por melhora estrutural To contact the translator on this story: Priscilla Murphy in Brasilia Newsroom at pmurphy134@bloomberg.net Reporter on the original story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net Editors responsible for the original story: Daniela Milanese at dmilanese@bloomberg.net Taís Fuoco, Patricia Xavier