Brazil: Brazilian real depreciates amid global and domestic uncertainties
December 4, 2014
The Brazilian real (BRL) has been losing ground against the US dollar in recent weeks, continuing the trend started in April. On 17 November, the real traded at 2.61 BRL per USD, which represented a 5.2% depreciation over the same day in October and 12.5% year than the same day last year.
The depreciation comes amid a weakening outlook for the Brazilian economy and reduced investor confidence. The real has fluctuated along with Brazil’s domestic politics, as uncertainty over the October election result and in which direction Pres. Dilma Rousseff would lead the economy persists. In addition, the slide also reflects low commodity prices and an increasing expectation that the Fed will raise U.S. interest rates in the near future.
The Central Bank has been intervening regularly in the foreign exchange market to support the real since May 2013. The current program is set to continue until the end of the year and it is unclear if it will be fully or partially extended. Amidst this backdrop, LatinFocus Consensus Forecast panelists expect the real to end 2014 at 2.38 BRL per USD. In 2015, panelists believe the real will depreciate further to 2.52 BRL per USD.