The Brazilian real appreciates on Friday amid a general improvement in Latin American markets, rebounding from a volatile week. While it touched the k
The Brazilian real appreciates on Friday amid a general improvement in Latin American markets, rebounding from a volatile week. While it touched the key psychological level of 5 reais per dollar during the week, it currently stands at 4.96. There were no interventions made by the Central Bank, according to most analysts.
The dollar fails to breach this key barrier in a week with no major economic developments in Brazil. Political conflict with Paraguay regarding energy purchases from the Itaipu dam and higher-than-expected inflation figures were the week’s points of discussion.
Brazil, and Latin America in general, continue to be affected by the lackluster performance of other emerging countries like China, Brazil’s main trading partner, Argentina, and Paraguay.
Regarding other news, the annual variation rate of the IPC (Consumer Price Index) in Brazil in January 2024 was 3.8%, up 0.1% from the previous month.
Inflation closed at 4.62% in 2023, a figure within the Central Bank’s targets. In recent months, the Bank has gradually reduced interest rates to the current 11.25%. For this year, the inflation target is 3%.
“The magnitude of the [monthly] increase is out of line with expectations and can be alarming if you look at the composition without considering seasonality,” said Carla Argenta, chief economist at CM Capital.
The Central Bank has announced its intention to maintain the pace of half-percentage-point cuts at its next meeting, scheduled for mid-March. However, the institution remains cautious due to the volatility of the international situation and the slowdown in the Brazilian economy.
According to market forecasts, the Brazilian economy grew by around 3% in 2023. However, for 2024, a significant slowdown is expected, with GDP expansion projected to be around 1.5%.
The Brazilian market will be closed on Monday and Tuesday due to the carnival holiday in Brazil, which starts tomorrow.
Liquidity next week may also be affected by the Chinese Lunar New Year holiday, which started today and extends into the following week, with Chinese markets remaining closed.
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