IPO Boosts Demand for Brazilian Real

The Brazilian real is starting this month extending last week’s advance and reverting a negative trend from the beginning of the year, as the appeal for assets in the country are attracting foreign capital inflows and helping the real to beat a number of currencies in
foreign-exchange markets.
Brazil has one of the highest interest rates around the world and renewed appetite for risk in equities markets are allowing the South American currency to post a series of gains versus important currencies with different economic profiles, specially before an IPO in Bovespa which may raise up to $5 billion, considering a significant part of this amount composed by foreign capital. Interest rates in Brazil may rise also in the following months, making the real to repeat last year’s story with the Aussie dollar to rank among the top performing currencies in forex markets.
Optimism is back, and now that pessimism coming from EU’s fiscal crisis and new lending requirements in the U.S. and China cooled down, the scenario for the real has really improved. If risk appetite continues to climb to real may reach new record lows, specially versus the pound and the euro.
USD/BRL closed this Monday at 1.7985 from an opening rate of 1.7995.