BRL Potential Ahead Of Rate Hikes

With interest rate swap contracts in Brazil now firmly pricing in the initiation of the central bank's monetary tightening cycle over the next month (see our online service on March 15 for 'Key Market Views: Taking Profit On Bovespa), we take a closer look at the Brazilian real, which stands to benefit from rising interest rates in the near term. The unit has made a strong comeback since coming off the BRL1.9000/US$ area in January, posting a recent high of BRL1.7562/US$ on March 12. The real has bounced off this recent high, trading at BRL1.7631/US$ at the time of writing, and it will take renewed conviction by the market to extend further gains towards major technical resistance around BRL1.7420/US$, in our view.

To read the full article, please choose one of the following options: