Discussion in 'Forex Trading' started by jjf, Aug 28, 2008.
Any thoughts as to where the BRL is heading in the next twelve months
Against what, the USD?
I think its going back in the direction of 2.00. This thing was way over done. Also, Brazil is also still very dependent on commodities. If they continue to correct, so does the Real.
That said, I wouldn't pick it up right here.
I remember brazilian analysts and banco central representatives saying they were seeing the BRL below 1.70 towards the end of the year.
There has been a lot of foreign investors who pulled out of the BM&F and Bovespa this year, and there was also a large exodus last summer. However, the brazilian economy is really strong, and they are expanding their markets for meat products and agricultural produce all the time, increasing poultry exports to asia and the middle east; they are really gaining market share.
Also, the government has made several reforms for helping small investors be able to enter the investment market - you can start investing with as little as R$ 20 nowadays. And since last summer there has been a string of reforms to ease investing for foreign and domestic investors.
With the food crisis as well as the ever expanding energy resources of Brazil - I don't see the BRL weakening against other currencies at all. They start exporting oil soon, and they really want to export refined oil products for bigger gains as a strategy. The whole of South America has had somewhat of a boon, Venezuela in particular - but Argentina has also gotten out of the worst crisis they were dealing with.
There are also a strong commitment by the brazilian government to support bilateral agreements, as well as the whole G20 push - although the WTO negotiations failed and they were playing tough - putting all their eggs in one basket. However, the brazilians are really pushing the envelope and doing a real effort in expanding their market share and exports. With the hundreds of millions lifted from the lowest poverty in the emerging markets, they also consume a lot more food and Brazil has very good standing with the other emerging markets.
I really don't see the BRL weakening at all, but of course the USD can swing somewhat, although the fundamental brazilian economy is very strong. Also, the weakness of the USD coupled with the credit crisis is not going to go away - and this has lead to more emphasis on the Euro, which again is not favourable for the USD in the long run.
Last night on Bloomberg US there was a translated interview of Brazilian president Lula from Bloomberg Brasil, where he outlined the plans and expectation for the Brazilian economy. I think the general outlook for Brazil is very positive, near term and medium term.
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