Further comments by President Lula da Silva, which could have been seen as interference in monetary policy, are likely to have put additional downside pressure on BRL, according to economists at Commerzbank.

Recent developments in Brazil are causing some concern

“Lula yesterday confirmed his view that current key rate levels of 13.75% are too high. In his view, this is not justified, and he called on companies to complain about excessive financing costs.”

“If doubts were to arise about the autonomy of the central bank while the government also pursues an expansionary fiscal policy that would not be good news for BRL. That is why recent developments in Brazil are causing some concern.”

“We can only hope that Lula will backpaddle again. If he was to keep flogging the same horse, then BRL might come under further depreciation pressure.”