Outlook for BRL: Danske Bank

Quotes from Danske Bank:

-Despite the continued depreciation of the Brazilian real (BRL) it is not substantially undervalued, particularly in the light of the sharp decline in commodity prices. We remain bearish on the BRL, especially on a three-to six- month horizon.

-1) Lower commodity prices will continue to be a drag in the short run, albeit there are signs commodity prices have bottomed out. 2) Brazil is also one of the emerging markets most sensitive to interest rate hikes in the US due to its weak external balances and the large share of foreign investors in Brazilian bonds.

-Incumbent President Rousseff was re-elected in the presidential elections in October last year. Macroeconomic policy has moved in the right direction after the election, albeit it will weigh on growth in the short run.