Consultants' Commentary: FX

T&R presents consultants’ insights on timely topics with this inaugural column: Brazil’s real has the wind in its sails.

The possible benefits of holding Brazilian short-term instruments or Brazilian reais may have been overlooked by treasurers as a result of the perceived contagion risk at the macro level over the past eight months.

During the bout of concern over Europe’s debt problems in mid-September, the real weakened to U.S. $1.95 from U.S. $1.54 in late July. The latest reading at U.S. $1.72 shows considerable potential for the real to appreciate against the greenback over coming months. In addition to the impetus favoring all risky assets (the tide lifting all boats), the Brazilian real has the wind in its sails as the result of other fundamentals.

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