Fiscal risks and weak growth add pressure on BRL

Little reason is seen to believe that BRL depreciating trend is over. Brazil economic activity continues to collapse and political commitment to push forth the necessary structural reforms remains lacking. 

As such, further cheapness in BRL compared with the BEER model (17% cheap as of now) looks warranted until a meaningful leadership reshuffle of thecurrent administration takes place. 

"Rising term premia due to fiscal concerns coupled with increasing market value of liabilities arising from a weak BRL pose nonnegligible risks to a sudden stop in the months to come", says Barclays. 

These add to negative global factors of weak China growth, commodity prices and Fed tightening. 

"Remaining long USD/BRL through a three-month call spread is recommended", added Barclays.