Bank’s positioning has cross-benefits from higher US interest rates and crude oil prices

BofA (Bank of America) announced the opening of a new negotiation with a long position in reais against the oneas pointed out in a report released to customers and the market this week.

“From an evaluation point of view,eal it is cheap and should benefit from high real rate differentials and positive surprises in economic growth. Positioning is also now more balanced after local funds halved their net long futures positions,” said the text.

BofA Securities assesses that the Brazilian monetary authority has demonstrated a more aggressive perception, given a more challenging global scenario, with signs that North American interest rates may take longer to fall.

“Real interest rate differentials between Brazil and Japan are not far from multi-decade highs. We forecast interest rates at 9.5% and inflation at 3.7% in Brazil by the end of 2024. For Japan, our forecasts are interest rates at 0.25% and inflation at 3.0%. This would put the real differential rate at 8.5%”said the bank.

The positioning suggested by the bank has the cross-benefits of higher US interest rates and US prices. Petroleum gross, according to BofA.

Among the risks monitored by analysts are the more state-oriented approach of the government of President Luiz Inácio Lula da Silva (PT) and a possible Japanese intervention in the foreign exchange markets.

In Brazil, further declines in Lula’s popularity could lead him to intervene in state-owned companies to increase spending, loans and subsidies, worsening budget balances. In Japan, the main risk is that the Central Bank will signal a further rate hike by June and the finance ministry will intervene directly in foreign exchange markets to limit the depreciation of the JPY,” these.

With information from Investing Brasil.


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