MUFG Bank analysts say the Brazilian real is motivated by several factors, but domestic problems remain a source of concern. They anticipate a gradual recovery of the real against the dollar in the coming quarters, but they warn that the scenario is under continuous evaluation.
“Brazil improved its performance in May compared to its peers, under the effect of three factors: i) heavy intervention by the Central Bank when the USD / BRL approached 6.0000, followed by the declaration of his governor on his preparation to reduce volatility and avoid BRL detaching from his peers; ii) positive mood abroad with the reopening of the economy in several countries and iii) reduction of political noise after a video of a cabinet meeting showed no compromise for President Bolsonaro who could have trigger an indictment request. “
“The USD / BRL remains strongly undervalued as it is the worst EM currency so far this year. Thus, it is possible to continue to increase if such a positive scenario continues. However, we do not see the recovery of BRL much further since we see many limits to this appreciation trend with many potential sources of concern. “
“Our appeal to 45,000 people by the end of 2020 is in line with a positive environment with the world emerging from the health crisis. But, given several domestic issues, the USD / BRL may well end up weaker than our forecast of 4.5000. Our scenario is subject to continuous evaluation. “