Brazil’s Real Advances on Transactions, Risk Appetite

The Brazilian currency is ending the year of 2009 as the best performing currency in foreign-exchange markets and advanced versus most of the majors as large sums of foreign currency were sold in local markets today, consequently appreciating the real.

After a single transaction of more than $200 million was effectuated in Brazil’s currency market, the real advanced versus all of 16 main traded currencies, and is likely to end the year as the best performing currency in foreign-exchange markets advancing as high as 33 percent versus the U.S. dollar, as the country’s resilience after the crisis, abundant availability of natural resources, and a rebound in BOVESPA, the largest equities market in Latin America, provided support for the currency to remain extremely attractive, even after the U.S. dollar became more appealing towards the end of the year as speculations that a monetary policy change by the Federal Reserve could provide higher-yield for investments in the U.S for traders.

The Brazil real is likely to remain attractive in 2010 even if the dollar is likely to rebound on Fed rate hikes expected for the second semester. High interest rates, a growing demand for commodities and a resilient economy still provide support for the currency to remain at the current high levels.

USD/BRL traded at 1.7344 as of 16:29 GMT from an opening rate of 1.7625. EUR/BRL touched the lowest level in 2009 at 2.4955 from 2.5322.

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