Brazil's currency is unlikely to cruise below 2.0 to the dollar this year and instead will give back modest gains after a surging rally, a Reuters poll found. The real soared last week to its strongest level since early October as investors flocked to Brazilian assets in hopes that the worst of a global recession that has torn through emerging markets is easing.
A poll of over 40 analysts from Brazil to Britain and the United States showed the real slipping back to 2.09 per dollar by the end of the year, a roughly 3 percent slide from its closing price of 2.025 per dollar. Most analysts were confident the real's surge would be cut short before it smashed through the key 2.0 per dollar level, where it has not traded since last summer.
The recent rally is unlikely to prove a hindrance to nascent signs of economic recovery in the country, the survey showed. "There are more positive aspects than negatives about the rally," said Silvio Campos Neto, chief economist at Banco Schahin in Sao Paulo. "It will help reduce inflation, allowing for interest rate cuts to continue. Besides that, it signals confidence by foreign investors in the country, as is seen by the new investment inflows."