According to Infomoney, brokerage firm Bradesco Corretora said today that the Brazilian Real (BRL) may continue its devaluation trends against the dollar in 2012, with a target price of R$1,90. According to the broker, this will occur due to the falling commodity prices and the Selic rate, making the country less attractive for foreign investment.

The research team led by Carlos Firetti has always been skeptical of the appreciation of the Brazilian currency, despite the country’s high interest rates and good economic fundamentals. According to the analysts, their skepticism stems from the belief that, despite these strong fundamentals, the main growth engine for the country’s economy is its dependency on commodities, especially iron ore. 

The brokerage also points out that commodity prices have a great influence on the parity between currencies. For instance, when compared to USD, the BRL has had strong volatility levels between January 2006 and 2011. Now when compared with the Australian dollar, which is also very correlated to iron ore (Australia’s main commodity), there was greater stability.

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