USD/BRL to end year at 3.30 - BBVA

According to the Research Department at BBVA, the Brazilian real will depreciate in the coming months on the back of political uncertainty, fiscal risk, and gap rates. 

Key Quotes: 

“After losing 7% and reaching 3.32 on the day that a recording allegedly incriminating President Temer was reported, the Brazilian real (BRL) gradually appreciated to reach 3.17, a relatively appreciated level.”

“Political noise, the increase in fiscal risk and the reduction of the gap between local and external interest rates support the view that the BRL tends to depreciate in the coming months.”

“We forecast the BRL (USD/BRL) to reach 3.30 at the end of this year and 3.50 at the end of 2018.”

“The sharp fall in inflation and the anchoring of expectations mean that monetary conditions will continue to be eased in the coming months. We continue to expect the Selic rate to reach 8.25% in 4Q17 and remain at that level for a long period.”