HALISTER1: BRL More Exposed to EMFX Mood as Repatriation Nears End: Mapfre

BRL More Exposed to EMFX Mood as Repatriation Nears End: Mapfre

(Bloomberg) -- With deadline to pay repatriation law’s fees and taxes on Oct. 31, BRL may now more closely track peers with U.S. rates seen rising by year-end, Luis Afonso Lima, economist at Mapfre Investimentos e Participacoes, says in a phone interview.
  • Effect of repatriation, which helped real to outperform its peers until recent days, is passing
    • BRL may follow other EM currencies impacted by increasing bets of Fed rate hike in December
    • “The BRL has already gained so much,” says Lima, who forecasts 3.20/USD for 2016-end
  • Brazil activity is still weak; external account data show some signs of worsening trend
    • BCB may speed up rate cut pace to 50bps from 25bps for Nov. 30 decision
    • Narrowing gap between local and external rates may help to support USD against BRL
    • While repatriation revenue may help Brazil to achieve fiscal target in 2016 and Temer has shown surprising success on spending cap votes, other reforms, such as social security, are much more challenging
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

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Luis Fernandes Lima (Mapfre Investimentos e Participacoes SA)

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