Analysts at Rabobank note that based on the domestic fundamentals and the geopolitical risks, assess the outlook for the Brazilian Real against the US Dollar.  

Key quotes

“Externally, Hamas attack on Israel triggers global risk-off sentiment, after US payroll grows above expectations in September and a US government shutdown is delayed.” 

“Domestically, the BCB governor still sees the current 0.50bp-cutting pace as appropriate, after the BCB released the latest Copom minutes and the CPI mid-monthly inflation in September confirmed inflation convergence will be slow.” 

“Our take: Geopolitical risks add depreciation bias to our view of the USDBRL at 5.05 by end-2023 as the BRL and other EM currencies had already been enjoying less carry trade gains. For now, with Fed Funds rate held at high levels until yearend and local relative fiscal fragility, we still see the USDBRL trading at 5.15 by end-2024.”