The Brazilian real is continuing its recovery after cratering to an all-time low against the US dollar this past spring. With the number of coronavirus cases beginning to come down and economic activity picking up steam, is the real preparing to put together a comeback story in 2021?
In September, the central bank’s economic activity index expanded 1.29%, beating the market forecast of 1%. This represented the fifth consecutive monthly economic expansion as the country continues to relax coronavirus lockdown restrictions.
This ostensibly lifted business confidence in November, climbing to a ten-month high of 62.9, which beat the median estimate of 62.
Retail sales were disappointing in September, rising just 0.6%, falling short of the market projection of 1.3%. However, retail sales expanded at an annualized rate of 7.3% in September, up from 6.2% in August.
As the economic numbers continue to improve, does this mean the real can return to its glory days. But while the real has shed about 30% of its value against the greenback this year, Economy Minister Paulo Guedes recently stated that foreign inflows will inevitably support the real and durability of the nation’s economic resurgence.
He told a foreign trade conference during a virtual address:
When will the (dollar’s) exchange rate go down? When there is success to attract foreign investments, when they finally come in to help us in infrastructure, concessions and privatizations.
The (dollar) will go down as soon as foreign investment returns en masse, which will guarantee that Brazil has finally come back.
Meanwhile, the coronavirus pandemic has seemingly improved in the South American country, with new daily infections sliding below 20,000. In total, Brazil has reported 5.89 million cases, with a death toll of 166,000.
The USD/BRL currency pair rose 0.02% to 5.4163, from an opening of 5.4154 on Monday. The EUR/BRL jumped 0.08% to 6.4256, from an opening of 6.4203.