The Brazilian real has been on a rollercoaster ride in recent weeks, notes Commerzbank FX analyst Michael Pfister.
It is trading just below 5.70
“After reaching its highest level in almost two and a half years at 5.70 in early July, the exchange rate fell sharply in the following days amid pronounced USD weakness. However, the low levels did not last long.”
“One can almost feel sorry for Brazil’s finance minister. For weeks he has been trying to reassure markets that Brazil is taking concerns seriously and reducing the budget deficit, only for Lula to raise fresh doubts. Friday’s announcement of a BRL15 billion spending freeze did little to help the situation.”
“True, this is not even half of the deficit accumulated so far this year, but it was a first step. But as long as the market fears that these efforts will not be sustained, the BRL will struggle. Either Lula leans towards a more balanced fiscal policy or the USD will have to weaken significantly again; otherwise, we are unlikely to see significantly lower levels of USD/BRL in the coming weeks.”
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
