The Brazilian Real currency (BRL) devaluation is expected to deteriorate in the short term, according to international analysts. Among the factors that may weaken the real against the dollar, analysts cite the increase in risk aversion, with the deepening crisis of sovereign debt in the euro zone, and the prospect of interest rate cuts in Brazil, which may cool the short-term capital flows (“hot money”) in search of the “carry trade”.
“As I am pessimistic about the eurozone problems, I see greater pressure for devaluation not only of the real (BRL), but also of other emerging countries currencies,” he told The Associated Win Thin, research director for emerging markets at Brown Brothers Harriman in New York. He said the BRL and other emerging currencies should go back to the level of May 2010, when it first broke out the debt problem of Greece. In that occasion, the BRL crossed the threshold of R$1.91 against the dollar. He believes that the exchange rate may hit that level in the next three weeks.