Short-term supportive events for BRL

The Brazilian real outperformed all major regional currencies yesterday as it posted a gain of 0.32% vs. the USD to USD-BRL 3.1684. The real is responding in a positive way to several developments in local markets of which the most important is the Bloomberg report that Petrobras is coming back to debt markets after being on the sidelines since last year. This is an important development not only for the company but also for Brazil at the macro level that shows that if this debt transaction were ultimately successful it would pave the road for other corporations to explore issuance options. 

From an external accounts perspective, if USD flows derived from capital markets transactions resume it would be again an important milestone as it would show that portfolio flows could support FDI flows in covering the still large current account deficit that is expected to almost hit $90bn during 2015, says Commerzbank. In addition to this, the central bank should be in the market tomorrow offering as much as 7,000 FX swaps contracts to roll over maturities coming due in the next weeks thus leaving the market with a feeling of having a good supply of USD for hedging purposes, needless to say representing a BRL supportive factor as well.