Brazil: Brazilian real rises to almost one-year high
June 10, 2016
The Brazilian real (BRL) rallied to the strongest value seen since July 2015 in June as better economic data and a new Central Bank government supported sentiment. On 8 June, the real closed the day at 3.36 BRL per USD, which represented a sharp 6.9% appreciation over the same day of the previous month. The real has gained 15.1% year-to-date, yet remains 8.0% weaker in value from the same day of the previous year.
The real’s appreciation comes on the back of improving macroeconomic data, a new Central Bank governor and expectations of a delay in further interest rate hikes in the U.S. Recent data showed that GDP contracted slightly less in Q1 and Ilan Goldfajn, the former chief economist at Itaú Unibanco Holding, was confirmed as the new Central Bank governor on 8 June. At his Senate confirmation, Goldfajn stated that he will fight inflation through monetary policy and is committed to a floating exchange rate, boosting market sentiment that he will be less interventionist than the previous government. The Central Bank had intervened periodically in the foreign exchange market through the sale of reverse swaps, which tend to weaken the currency.