USD/BRL to advance nicely towards 5.60 in the second half – MUFG

FXStreet Insights Team FXStreet

USD/BRL broke below key support at the 5.00-level in a more consistent way after several attempts to do so. Although the Brazilian real may stay resilient longer than expected, in the end, economists at MUFG Bank forecast USD/BRL at 5.60 by end-2022.

More meaningful BRL depreciation in the second half

“The BRL could remain at strong levels for longer this year. However, we don’t see the bullish trend as sustainable in the medium to the long run.”

“On the domestic side, we consider that the campaign for the October presidential election might produce some noise, followed by growing concerns on how the new administration that will take office in 2023 will address the fiscal imbalance. Keep in mind that the current good figures don’t solve the structural fiscal problem.”

“In the external environment, we may expect some stabilization of commodity prices or not a huge raise, and the predominance of Fed actions in normalizing the monetary policy in the US.”

“We expect the BRL to re-weaken to the 5.60-level by year-end”

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FXStreet

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