On Friday, the 29th of November 2019, the Brazilian currency fell over 1.20 per cent to wind down a lacerating month at 4.24 Brazilian Real against its American counterpart, just a notch shy of its all-time low of 4.2770 against the US dollar reached on Tuesday (November 26th), while the Brazilian currency fell more than 5 per cent on November, remarking its second-biggest monthly decline ever since August when it had faltered more than 8 per cent despite intervention of its Central Bank.
In point of fact, Friday’s (November 29th) market had also witnessed multiple interventions from the Brazilian Central Bank, but could not manage to grapple with a steep selling pressure. Besides, Friday’s (November 29th) decline had also took the Brazilian Real back to its all-time record low of 4.2770 against the American currency reached on Tuesday (November 26th) as beforementioned, while Tuesday’s tottering was almost entirely prodded by a quote from the Brazilian Central Bank saying Brazilian market was witnessing a dysfunctional and illiquid market which eventually had started off a steep sell-off pressure.
Since then, the Brazilian Central Bank had been selling off US Dollar on the spot market to revive a shattering Brazilian currency, while citing Central Bank’s intervention might result in an abrupt upswing next week, leading US lender Goldman Sachs’ analysts wrote in a client note on Friday’s (November 29th) market wind down, “Real weakness may be a feature (rather than a bug) of a backdrop that includes subdued inflation, low nominal and real carry, and a renewed deterioration in Brazil’s external balances.
So, the bar for outright real longs is higher than in the past, and a more significant and sustained constructive story on the real likely depends on a larger move lower in the dollar, which is not our base case for now. ”