Brazil’s Real Rises to R$3.80 to the Dollar in 3-Month High

By Jay Forte, Contributing Reporter

RIO DE JANEIRO, BRAZIL – Despite the news yesterday that the Brazilian economy ended 2015 with the biggest GDP drop in 25 years the financial market saw a surge. The Brazilian real currency closed at the highest value in three months, R$3.802 to the U.S. dollar.

The dollar ended Thursday (March 3rd) selling at R$3.802/US$1, down R$0.086 (-2.2 percent). The price is the highest since December 10th (R$3.801). The strongest of the day, around 3:30 PM, the dollar was being sold at R$3.788. The currency closed yesterday up 5.02 percent in March and 3.7 percent in 2016.

The São Paulo Stock Exchange (Bovespa), also had a strong day ending up 5.12 percent, the highest level since November 23rd last year, ended the day at 47,193 points.

The highlight was Petrobras shares, the common shares (which carry voting rights in the shareholders’ meeting) of Petrobras rose 12.47 percent and closed at R$9.11. Preferred, which give preference in the distribution of dividends, were up 16.28 percent, to R$6.57.

Yet according to English expatriate living in Rio, Amit Ramnani, and director of Ipanema Wealth, an independent financial consultancy firm, the currency rally is probably short-lived. “The real has strengthened in the short term, but it still remains in a similar range as the final quarter of 2016.”

Ramnani adds, “There has been no significant change in the fundamentals and the opacity of the ongoing political scandal so it may be an opportune moment for Brazilian investors to buy dollars and other hard currencies. Many analysts are still estimating that the Real could fall to R$4.0/US$1 or R$4.5/US$1.”

Still it was great news compared to the Thursday report by the IBGE (Brazilian Statistics Agency) Brazil’s GDP registered a decline of 3.8 percent in 2015, totaling R$5.904 trillion, the greatest decline since 1990. Also last month Moody’s downgraded the country’s sovereign risk to junk status and changed the country’s outlook to negative, they were the last of the three large risk-rating agencies to lower Brazil’s credit ratings.