The Brazilian Real has performed very impressively against the USD since the beginning of October. Economists at Commerzbank analyze USD/BRL outlook.
Real seems well equipped – for now
Of course, it is easier to sound hawkish while the real economy seems robust. It gets more difficult once a recession is approaching or inflation rises again so a central bank has to take action. Today’s retail sales and the inflation data due on Friday are likely to provide further information in this respect.
If the economy turns out to be robust and inflation does not rise again there is a lot to suggest that the Real will remain better-equipped to stand its ground in possible periods of USD strength than comparable currencies.
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