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Periods of investment in Brazil and an appreciating real are typical periods of bubbles linked to a very expansionary monetary policy, according to analysts at Natixis. USD/BRL trades at 4.977.

See: USD/BRL to end the year at 5.45 – Rabobank

Key quotes

“The Brazilian economy has been struggling since 2011 with weak or negative growth, a  structural external deficit, deindustrialization, the decline in manufacturing employment and in investment, a permanent fiscal deficit and rising government debt.”

“The very poor economic situation in Brazil since 2011 should logically lead to permanent capital outflows and a permanent depreciation of the Brazilian real. However, there have been periods of capital flows to Brazil and an appreciating real since 2011.”

“Since 2011, there have been capital flows to Brazil and an appreciation of the real briefly in 2014, in 2016-2017, in late 2018, briefly in late 2019, and since mid-May 2020. Given the economic situation in Brazil, we can, therefore, consider that investors’ behaviour has been abnormal in these periods.”

“We see that the periods since 2011 when capital has been flowing to Brazil and the real’s exchange rate has been appreciating (2014, 2016-2017, late 2018 and late 2019, since midMay 2020) are periods when risk aversion has been low and liquidity has been abundant.


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