Forces Weakening the Real

BRAZIL ECONOMICS - Report 09 Mar 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

Nobody who uses two elements – the Brazilian current account deficit and the change in the international scenario, marked by appreciation of the dollar and decline of commodity prices – could have doubts that Brazil has entered a currency depreciation cycle. But these two forces together are insufficient to explain the intensity of the depreciation last week, when the real reached R$3.06/US$. In this note we analyze each of the forces that are behind the real’s trajectory.

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