Brazil’s Real on Two-Weeks Low After Weak Economic Data Release

The Brazilian currency dropped to the lowest level in two weeks after weak global economic data decreased confidence among investors, attracted by safety and damping demand for commodities and emergent markets currencies.
Brazil’s real together with the South African rand were two of the best performing currencies favored by signs of economic recovery which started to appear in April, spurring demand for high-yielding positions and decreasing risk aversion which was at a extreme high level, due to the concerns related with the global slump. This week was rather pessimistic compared to the previous ones, and poor economic data coming from the U.S. and the U.K. brought equities market down around the world, consequently fueling demand for safer assets, making the Brazilian real to fall back to the same rate as of May 29. The Brazilian currency has accumulated 16 percent of gains versus the U.S. dollar, the second best performance against the 16 most traded currencies.
Analysts relate the global movements in stocks directly to real’s fall this week. After a significant rally that revived stock markets after severely bearish months since last October, mixed economic data is confusing consumer’s confidence to take their positions and purchase high-yielding assets. The real may rebound its rally, but it’s unlikely that gains will be sharp if markets still confused about the world economic outlook.
USD/BRL closed at 1.9892 yesterday in the Brazilian session, climbing from 1.9735 two days ago, this morning it reversed falling to 1.9690 as of 11:32 GMT.

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