USD/BRL expects further volatility – Rabobank

Mauricio Oreng, Senior Market Strategist at Rabobank, assessed the prospects for the Brazilian Real.

Key Quotes

“The BRL stands among the worst performing (major) currencies for the year, posting an accumulated loss of around 3%. After testing 3.20/USD, the Brazilian currency weakened recently to just north of 3.40. While the move up to 3.30s was mostly on external drivers (i.e. global risk-off driving commodity prices lower, EM CDS wider) the rise to 3.40s was highly idiosyncratic, reflecting jitters related to the outlook for economic reforms after October general elections. And more volatility is expected ahead”.

“We look for FX rate at 3.30 for end-2018 and 3.70 for end- 2019, with a post-election rally obfuscated later on by tighter global financial conditions”.