Halister News

(Bloomberg) -- BCB may keep acting to avoid further BRL gains as investors bet on a pro-reform government coming in if Pres. Rousseff’s exit is approved later today, Vladimir Caramaschi, chief strategist at Credit Agricole Indosuez in Brazil, says in a phone interview.

• BCB may keep offering FX reversal swaps to completely unwind its outstanding position; while BCB is likely to keep intervening, the continued interventions could generate a debate among Brazil economists on whether it’s worth it to keep acting
  • Should BCB at any moment decide to buy spot USD, instead of only offering reverse swaps, it may be criticized by adding to government debt; on the other hand, if BCB opts not to act and lets BRL strengthen further, current account deficit may worsen
• BCB interventions may limit BRL gains at around 3.30/USD
• Should Rousseff is ousted after today’s Senate’s vote, inflow may increase
  • Investors also optimistic on reports that likely president Temer could pick Ilan Goldfajn as new BCB head; “all the names that have been reported are excellent. But Goldfajn, as former BCB director and economist of one of the biggest Brazil banks, is seen as the name that could cause the strongest positive impact among investors,” Caramaschi says
• NOTE: Goldfajn is chief-economist at Itau, Latam’s biggest bank by market value
• NOTE: Rousseff impeachment vote in Senate expected to start at around 7pm