High carry and no negative news equal appreciation in BRL

The Brazilian real continues with the appreciation streak as it gained 1.1% vs. the USD to USD-BRL 3.056 by the end of the day.

The US Fed communiqué did offer a more dovish than expected language that created a good sentiment in the BRL towards the end of the trading session. Under this scenario, the short-term could bring further appreciation to the BRL as the high cost of carry of holding long USD positions, in the absence of domestic negative news, could prove to be an expensive value proposition says Commerzbank. 

Furthermore, the CB (COPOM) continues to send signals that the tightening cycle should continue, at least in the short-term, possibly beyond 14%, reinforcing the effect described before, according to Commerzbank.