Disclosure – Independent Thematic/Non-substantive Research
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour.
I could see my colleague Thomas involuntarily shudder as I typed the above sentence (if he reads this he’ll now know why he suddenly felt a random surge of anger). Chartism is, not entirely unjustifiably, oft derided. Yet I think there are sometimes some interesting read-throughs we can see from price levels.
In this instance, I think it is interesting that the Brazilian Real seems to be able to attract buyers relative to the US Dollar when it is around the current level. We’ve seen it around this level at other times in the past, and generally we’ve seen a rally in the BRL subsequently.
Brazil is, as the old investment joke goes, the country of tomorrow and it always will be. However, with its economy still tentatively recovering from the worst recession in Brazilian history, fiscal reform (especially surrounding pensions) in the political zeitgeist, low inflation (and attendant ability to continue to cut interest rates to stimulate growth) and a large pool of overseas assets, I wonder if we could be setting the stage for a rally in Brazilian assets.
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