USD/BRL: From targeting 5.00 to hover around a 5.15-5.50 range – Credit Suisse

Strategists at Credit Suisse shift from a short-term USD/BRL target of 5.00 to adopting a 5.15-5.50 USD/BRL range, with a mild bearish BRL bias. 

See: USD/BRL to advance nicely toward March and April highs at 5.7560/5.8795 – Commerzbank

More carry, less appeal

“We acknowledge that positive near-term developments, such as an improvement in the political impasse around the spending cap, or a weaker than expected inflation print, can drive further strength in BRL in the near-term, especially with many market based estimates of risk premia retreating from recent extremes.”

“The key points that made us favor BRL as a structural long back in Q2, namely the high carry and the strong growth profile, have become much more uncertain. This brings us to think that a range approach in USD/BRL is likely to be more appropriate in coming weeks and months than a strictly directional one.”

“We shift from a short-term USD/BRL target of 5.00 to adopting a 5.15-5.50 range for the coming weeks.”