USD/BRL likely to trade around 3.35 by end-2018 – Lloyds bank
Source: FxWire Pro - Commentary / 21 Nov 2017 15:37:47 Eastern Standard Time
The USD/BRL pair has risen higher in the past month, owing to elevated political uncertainty in Brazil. The currency pair breached 3.30 for the first time since July. According to a Lloyds Bank research report, the baseline projections indicate towards further gains in the currency pair from current levels. This is for two main reasons. Firstly, fiscal reform attempts in Brazil are expected to come under constant political threat ahead of presidential elections in October 2018. Therefore, investors might shun Brazilian assets on credit concerns, to the benefit of the U.S. dollar.
Secondly, easier monetary policy from the Central Bank of Brazil is expected to erode the interest rate carry benefit of holding the real. The central bank lowered the interest rates by 75 basis points to 7.5 percent in October. It is further expected to lower the rate to 7 percent by the end of this year. On the contrary, the U.S. Fed is likely to continue to raise policy rates.
“We forecast USD/BRL at 3.35 at end-2018”, added Lloyds Bank.
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