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BRL: More Weakness, But BRL2.0000/US$ To Hold

October 2011 | Currency Forecast

Although momentum indicators on the Brazilian real are the most oversold they have been since the 2008 blowout, we are not yet convinced that a near-term reversal is on the cards. With no clear sign of an end to the current bout of global risk aversion we see potential for the unit to make a clean break through BRL1.9000/US$, beyond which the next level of support comes in at BRL2.0000/US$. Based on the domestic economic picture we would expect this level of support to hold, but if it does not we could see a move back to BRL2.6000/US$, a 40% move down from the current BRL1.8909/US$ level.

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