Brazillian Real (BRL)

m22au · Sep 13, 2018

Following the Turkish Central Bank interest rate increase (https://www.elitetrader.com/et/threads/turkish-lira-try.320094/page-9#post-4726991) at 7am Eastern, TRY rallied, and so did ZAR.

BRL initially rallied (BRE October futures went from 0.2395 to 0.2418, but then gave that all back by 9.30am Eastern. At 3.30pm Eastern, it was at 0.2375, less than 1% away from the 30 August low of 0.2366.

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m22au · Nov 19, 2019

The BRL is very close to its record low somewhere in the 4.20s.

The following Reuters article said the low was about 4.25 in 2015.

"UPDATE 1-Brazil's real posts lowest ever close of 4.2061 per dollar"
https://www.reuters.com/article/bra...-ever-close-of-42061-per-dollar-idUSL2N27Y0Y7

m22au · Nov 26, 2019

I think that's a record low for the BRL, with USD/BRL now at 4.2635.

BRE December futures at 0.2350 after reaching a low of 0.2342

Daal · Nov 26, 2019

m22au said:
I think that's a record low for the BRL, with USD/BRL now at 4.2635.

BRE December futures at 0.2350 after reaching a low of 0.2342

You got to keep in mind that because of the inflation difference between the USD and BRL, the BRL is destined to go down no matter what. Its not necessarily a signal of anything meaningful

m22au · Nov 26, 2019

Daal said:
You got to keep in mind that because of the inflation difference between the USD and BRL, the BRL is destined to go down no matter what. Its not necessarily a signal of anything meaningful

I somewhat agree with you. However given that the 4.20 to 4.25 level acted as resistance in 2015, 2016 and again in 2018, the breakout to a new BRL low carries a bit more significance.

The 14 to 15 month cup-with-handle that it has formed since September 2018 looks nice and juicy.

m22au · Nov 26, 2019

Just looking up some relevant stats for background info:

https://tradingeconomics.com/brazil/interest-rate
BRL interest rate = 5.00%
next meeting = 11 December
tradingeconomics forecast: 4.50%

https://tradingeconomics.com/brazil/inflation-cpi
inflation YoY = 2.54%
next release = 6 December
tradingeconomics forecast: 2.40%

Daal · Nov 26, 2019

m22au said:
I somewhat agree with you. However given that the 4.20 to 4.25 level acted as resistance in 2015, 2016 and again in 2018, the breakout to a new BRL low carries a bit more significance.

The 14 to 15 month cup-with-handle that it has formed since September 2018 looks nice and juicy.

Some economists wrote articles talking about how, if you correct for inflation, the Real has many other significant lows to come

Like the 7.577 all-time low from the FHC presidency in October of 2002. 6.536 from the Lula presidency in Jan 2003.

I suspect this move has more to do with the fact that nomimal and real interest rates have come down a lot in Brazil so the country is no longer a haven for carry traders looking to park cash and pick up easy profits. From a fiscal perspective, they just passed pensiom reform and there are talks of more reforms to come so things are fine, in fact if you look at the spread on BR bonds to UST bonds, they are super low right now