Discussion in 'Stocks' started by OTCkrak, Jan 3, 2011.

  1. This discussion is actually related to USD/BRL FX but tradable through this ETF - BZF.

    Here is the deal, the country is booming.. It has Oil, Minerals, and Agriculuture to export. The domestic economy is doing well, the lower classes are coming out of poverty and many new consumers are buying first time homes and domestically built automobiles.

    For reasons i do not support, the central bank effectively limits the appreciation of this currency. In 2000 it actually traded at parity to the USD, went to 4.00 and now sits at 1.65.

    I estimate that if it was a "free float" this could easily hit 1.25 on capital inflows and investment demand. I believe in the long run a strong currency and 'lower' market rates are the best for the open and the consumer.

    Anyways, it appears the CB is about to raise interest rates again, to rein in inflation currently 6% a year.. but has pledged to not allow the currency to appreciate..

    EXPLAIN THIS TO ME.. how do you fix your currency at around ~1.70, raise deposit rates, and not expect MORE domestic inflation? IMO, let the currency appreciate v USD which would effectly have a delfating effect on domestic prices. They are obssesed with build foreign reserves, well this is their chance to buy USD alot more cheaply.

    The Canadian economy went through this just fine and the domestic economy of Brazil is in much better conditions to a stronger currency with lower real interest rates. I suspect there is a huge lobby and special interest group that is behind this manipulation.

    Let the currency appreciate, and start lowering interest rates to stimulate real investment. If you believe commodities are going higher especially Oil and the USD is going to poop. BRL HAS TO APPRECIATE.