Should we expect an appreciation of the Brazilian Real?
Brazil, in common with other emerging markets, has suffered persistent capital outflows since the US Federal Reserve started tightening monetary policy. This has worsened in recent months as part of the emerging markets sell-off. According to Emerging Portfolio Fund Research Inc., in the period July-Sep 2018 investors withdrew US$3bn from the Brazil equity market. The Real has depreciated by 17.2 per cent year-to-date in 2018, undermining confidence in the currency. Is the positive currency and equity market reaction to the victory of the right-wing candidate Jair Bolsonaro (46 per cent of the votes) in the first-round elections, merely an expression of relief or is it the signal of better times ahead? The Real appreciated 2.7 per cent between the 5 and 15 of October. In the same period, the Bovespa increased by 1.26 per cent.
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