Brazilian Real Falls Further on Risk Aversion, Currency Outlook

The Brazilian currency posted the second straight week of losses versus the U.S. dollars and several other currencies as risk aversion was predominant in this week’s session forcing investors back to safer bets in refuge currencies like the yen and the Swiss franc.
After speculations suggesting that Brazil’s real is overpriced spread out in financial markets worldwide, the South American currency did not manage to revert its past week’s losing trend posting another decline as currency markets closed yesterday, in a week marked by risk aversion after Greece’s deteriorating financial situation was exposed when Standard and Poor’s downgraded the nation’s credit rating for the second time this year, bringing pessimism among traders that opted for safer bets leaving emergent market assets less attractive. The Brazilian real gained more than 30 percent versus the greenback this year remaining as the best performer in currency markets in 2009.
Speculations suggesting that real’s levels aren’t back by fundamentals combined with a general risk averse sentiment during the week forced the real down versus several currencies, according to analysts. The real may extend its losses in the next week if this scenario remains unchangeable.
USD/BRL closed the week at 1.7913 from Monday’s opening rate of 1.7605.

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