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Brazilian Real Climbing
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Highlights include TAM (TAM - Analyst Report), AmBev (ABV - Analyst Report), Net Servicos (NETC - Analyst Report), Vivo (VIV - Analyst Report) and Sabesp (SBS - Analyst Report).
Brazilian Central Bank buys over US$1 billion in the cash market, but the real ends up higher
As we have said last week, the Brazilian real is heading on a one-way street up against the U.S. dollar; we see this as a lasting trend and not as a short-term correction. As we also said here, the Brazilian Central Bank policy of accumulating reserves is a very good one, but it will not prevent the appreciation of the Brazilian real.
In the next few days, the Brazilian currency will test the psychological level of BRL/USD 2.00, and we expect it go through it without major problems. Yesterday the Brazilian BRL/USD reached 2.02 and it did not go further because the Brazilian Central Bank did all it could to prevent a major appreciation.
Just yesterday, the Brazilian Central Bank acquired US$1.185 billion. The Brazilian Government and export companies would like to prevent an appreciation of the real past BRL/US$ 2.00. It seems a more difficult task every new day.
As we said last week, there is just one solution for the currency appreciation problem in Brazil: lower interest rates. After three aggressive cuts this year, current rates are at 10.25% per year -- still too high.
We were expecting rates to reach 9% by the end of 2009. Now we are convinced that this is not realistic. Interest rates should be below 9% -- our new guess is 8.5% by the year end. Nevertheless, the Brazilian real will continue to appreciate in the very short-term.
In such an economic environment, we continue to recommend companies focused on domestic demand, particularly the ones that would benefit from the currency appreciation. We like TAM (TAM - Analyst Report), AmBev (ABV - Analyst Report), Net Servicos (NETC - Analyst Report), Vivo (VIV - Analyst Report) and Sabesp (SBS - Analyst Report).
Brazilian Central Bank buys over US$1 billion in the cash market, but the real ends up higher
As we have said last week, the Brazilian real is heading on a one-way street up against the U.S. dollar; we see this as a lasting trend and not as a short-term correction. As we also said here, the Brazilian Central Bank policy of accumulating reserves is a very good one, but it will not prevent the appreciation of the Brazilian real.
In the next few days, the Brazilian currency will test the psychological level of BRL/USD 2.00, and we expect it go through it without major problems. Yesterday the Brazilian BRL/USD reached 2.02 and it did not go further because the Brazilian Central Bank did all it could to prevent a major appreciation.
Just yesterday, the Brazilian Central Bank acquired US$1.185 billion. The Brazilian Government and export companies would like to prevent an appreciation of the real past BRL/US$ 2.00. It seems a more difficult task every new day.
As we said last week, there is just one solution for the currency appreciation problem in Brazil: lower interest rates. After three aggressive cuts this year, current rates are at 10.25% per year -- still too high.
We were expecting rates to reach 9% by the end of 2009. Now we are convinced that this is not realistic. Interest rates should be below 9% -- our new guess is 8.5% by the year end. Nevertheless, the Brazilian real will continue to appreciate in the very short-term.
In such an economic environment, we continue to recommend companies focused on domestic demand, particularly the ones that would benefit from the currency appreciation. We like TAM (TAM - Analyst Report), AmBev (ABV - Analyst Report), Net Servicos (NETC - Analyst Report), Vivo (VIV - Analyst Report) and Sabesp (SBS - Analyst Report).
Read the full analyst report on TAM
Read the full analyst report on ABV
Read the full analyst report on NETC
Read the full analyst report on SBS
Read the full analyst report on VIV
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