• USD/BRL likely to trade around 3.35 by end-2018 – Lloyds bank

    Source: FxWire Pro - Commentary / 25 Oct 2017 16:46:25   Eastern Standard Time

    Over the past month, the USD/BRL pair has moved higher, driven by lower iron ore prices and increased political uncertainty in Brazil, noted Lloyds Bank in a research report. The pair is closer to the top end of its 3.08 to 3.21 trading range, which has been in place since August. The baseline projections indicate towards additional gains in USD/BRL from current levels.

    The fiscal reform efforts in Brazil are expected to come under constant political threat before the presidential elections in October 2018. Therefore, investors might shun Brazilian assets on credit concerns, to the benefit of the U.S. dollar, stated Lloyds Bank. Secondly, easier monetary policy from the Central Bank of Brazil is expected to erode the interest rate carry benefit of holding the real. The Brazilian central bank had lowered rates by 100 basis points to 8.25 percent in September and is likely to lower further to 7 percent by the end of 2017.

    “In contrast, we forecast the US Fed to continue to hike policy rates. We forecast USD/BRL at 3.35 at end-2018”, added Lloyds Bank.

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