Brazil Real Jumps as Credit Suisse Joins Nomura Forecasting Gain
“Today Brazil and other emerging-market currencies became attractive again,” Daniel Cunha, chief economist at XP Investimentos, said by phpone from Rio de Janeiro. Nomura strategist Tony Volpon in New York wrote that the firm forecasts that the real will trade at 2.20 by year-end and 2.30 by the end of 2014.
The central bank last sold currency swap contracts on July 10, the 13th day of intervention since May 31 to stem the real's decline. Central bank president Alexandre Tombini said las t month that policy makers are working to contain inflation that may stem from a decline in the currency.
Eoin Treacy's view
The Latin America Dollar Index hit a
medium-term peak in July 2011 near 120 and has encountered resistance in the
region of the 200-day on successive occasions since. Following a steep decline
between April and June, the Index had developed a short-term oversold condition
which is now in the process of being unwound. The Brazilian real and Mexican
Peso dominate the Index with a 33% weighting each.
The US Dollar pulled back sharply against the Brazilian Real yesterday but recouped much of the decline today. This increased volatility suggests at least temporary indecision and a pause in the Dollar's advance remains more likely than not. The Bovespa Index declined steadily for much of June but has lost momentum and rallied well yesterday. A sustained move below 45,000 would now be required to question potential for a further unwind of the short-term oversold condition relative to the 200-day MA.
Following an impressive rebound in May and June, the US Dollar has given up half its gain against the Mexican Peso. A break in the short-term progression of lower rally highs would be required to question current scope for additional US Dollar weakness. The Mexican stock market index hit a medium-term peak in February and declined persistently until the last week of June when it posted a large upside weekly key reversal. It has held the majority of the rebound to date but a sustained move back above the 200-day MA, currently near 41,500, would be required to bolster the recovery hypothesis.
The Colombian and Chilean stock markets have also found at least short-term support and are unwinding oversold conditions relative to their 200-day MAs. Their currencies have also at least steadied against the US Dollar.
While the Argentine Peso continues to trend lower against the Dollar, the Merval Index found support in the region of the 200-day MA three weeks ago.