BRL: Weak Fundamentals To Drive Further Depreciation
We expect the Brazilian real to continue trading within the BRL2.200/US$ and BRL2.400/US$ range in the coming months. Our view for relatively moderate, steady depreciation is underpinned by our expectation that the Banco Central do Brasil (BCB) will continue utilising its FX swap programme to prevent any sharp sell-off in the unit ( see 'BRL: Major Downside Limited For Now', November 27 2013). Nevertheless, the real will remain vulnerable to bouts of risk aversion and we therefore cannot rule out another sharp sell-off in the next few months. In this regard, we believe that the unit's recent low of BRL2.455/US$ level will provide a key level of support in the coming months ( see 'Technicals Highlight Risks Of Significant BRL Weakness', December 5 2013).
|Weakness To Persist Throughout 2014|
|Brazil - Exchange Rate, BRL/US$ (Daily)|