The Brazil trade continues to work with equal lifting coming from both the currency and the Ibovespa.  In total return you have seen a 14% move off the lows on Dec 16th with the drivers being.

Brazil Flag

  • Dilma trying to make structural reform - yes, that’s right real reform in Brazil (EWZ, quote).  It hasn’t happened and won’t happen overnight but even lip service on budget cuts announced last week is impressive
  • Emerging Market currencies overall laughing the face of a stronger U.S. Dollar (UUP, quote). The DXY strength is clearly and Euro & Yen phenomenon for now.  Since the December lows the USD has fallen against key Emerging Market crosses:
    • 70 to 11.40 in ZAR
    • 40 to 2,32 in TRY
    • 80 to 14.60 in MXN
    • 50 to 61.50 in INR
    • 1120 to 1182 in KRW
  • Commodities grinding into a base
  • Better China (FXI, quote) data
  • Brazilian banks sowing better loan figures and reasonable NPL measures

This won’t be pretty or a straight line but Brazil will catch many off guard in 2015 with its constructive performance.

 Chart_ EWZ


Tagged with:

Leave a Reply