Just so we are not accused of being biased… 
Yesterday we posted a “bear” case for the BRL, so now we post the “bull” case scenario from the “Latam Sniper” trading newsletter of french bank BNP Paribas. They offer two “long” BRL trade strategies.

(do not ask us if we agree… cause we don’t)

Trade 1: Long BRL/CLP

BRL underperformed its peers ahead of rates decision on fret of BCB speeding up the pace of rate cuts. Nevertheless, we strongly believe that USDBRL at 1.90 is a level that could spark BCB intervention, as they did back in later September and early October. Long BRLCLP is in our view, the best way to be positioned while we wait for the BCB to sell USD, leaving us relatively well protected against a further deterioration in the external environment.
Trade 2: Long BRL via options
With USDBRL at 1.78 we see a good opportunity to initiate bullish BRL strategies. We have no doubt to affirm that in the case of a stabilization of the EU jitters, BRL will find ample room to appreciate. The outlook for the balance of payments remains pretty buoyant, with FDI and portfolio flows strong and trade balance still sound for 2012. Our models suggests a net spot inflow in 2012 of around USD 30-40bn. We understand fundamentals are doing little to explain price actions, but we would like to take the opportunity of the recent sell-off to build up positions supported by fundamentals. Besides, one must not forget the BCB’s commitment to act aggressively when USDBRL tested the 1.90 handle in September and October. We expect the same approach if USDBRL reaches the 1.90 handle again.

Buy 1-m USDBRL 1.77 Put RKO 1.668 AND Sell 1-m USDBRL 1.92 Call KI 1.99 for a zerocost structure (Expiry 19 December). Spot ref: 1.784

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