Exotic Currencies Rebound – Whats Next?
In last 24 hours Brazilian Real and Mexico’s Peso rebound as much as 5% Is it the beginning of global central bank intervention? Lets Talk…
Brazilian Real has fallen 28% in last two months, causing big Latin American companies to brink of bankrupcy. Apprantly companies lost more than USD 2.2 Billion in derivatives. It is about time for someone to step in and take control.
Brazil’s central bank will pump the equivalent of $50 billion into currency markets, its boldest move yet to stop the tumble. The real soared after the announcement, climbing 5.2 percent and erasing an initial slump of as much as 5.8 percent. Authorities said the injection will be in the form of contracts that will allow investors to protect against further declines in the Brazilian currency.
Mexico’s Central Banks took the similar actions and bought $1.1 billion worth of pesos causing it to rebound from a record low, snapping a four-day losing streak. Banco de Mexico’s purchase at two auctions today added to the $12 billion of pesos it has bought over the past two weeks to stem a rout in the currency.
The peso gained 3.3 percent to 13.4170 per U.S. dollar from 13.8790 yesterday. It rose as much as 4.7 percent, its biggest intraday gain since Oct. 13. Earlier the peso touched 14.3017, the weakest level since Bloomberg began tracking the data in 1971.
Venezuela’s Bolivar however made 10 month record low. Its decline arising from falling demands in Crude oil due to slowing economy. Crude oil still remains the biggest export for Venezuela. The bolivar has plunged 44 percent since mid-August to 5.9 per dollar.
I think that we are due to see some action from USD, perhaps a rebound to 1.4000 in coming days. I would love to hear your thoughts on this article, please feel free to comment.
Source: Bloomberg
