HALISTER1: BRL Up With Brexit Relief; BCB Unlikely to Stop Gains: Analysts

BRL Up With Brexit Relief; BCB Unlikely to Stop Gains: Analysts

(Bloomberg) -- BRL may rise further should U.K. referendum confirm polls that favor “remain”; BCB is unlikely to halt gains given less interventionist approach of new governor Goldfajn, analysts say.
  • “Goldfajn made it clear that he wants to let the FX rate float,” Daniel Weeks, chief economist at Garde Asset Mgmt, says in a phone interview
    • Stronger BRL, should Brexit risk be removed, may open room for BCB to act with FX reverse swaps to curb its outstanding position; however, the auctions won’t be set to influence BRL levels
    • Tension from politicians hit by plea bargains not a drag since acting president Temer has not been directly hurt; outlook of reforms also helps to counterbalance concerns over states’ debt
    • BCB may not intervene to halt BRL, as a stronger BRL is helpful to ease inflation, which is still above targets, Jason Vieira, chief economist at Infinity Asset Mgmt, says
  • Weeks see BRL reaching 3.20/USD if Brexit doesn’t materialize; Vieira predicts 3.25, as U.S. Fed’s rates outlook may replace Brexit as main focus for mkts
  • NOTE: Goldfajn on June 13 said BCB may use available FX tools w/parsimony
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

People
Daniel Weeks (Garde Asset Mgmt)
Ilan Goldfajn (Banco Central do Brasil)
Jason Vieira (Infinity Asset Management Administracao de Recursos)
Michel Temer (Federative Republic of Brazil)

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