USD/BRL forecast march 26-30 2012

USD/BRL forecast march 26-30 2012 : More aggressive action by the Brazilian authorities is likely to keep BRL from appreciating in the near term. Continued USD buying intervention by the central bank combined with the threat of more policy action has effectively changed the market psychology towards the assumption that the new floor for USD/BRL is 1.80.

Recent press reports suggest accelerating payments of external debt, thereby utilizing dollars that have been accumulated. Minutes to last COPOM meeting reinforce our view that rates likely to trough at 9.0% or at the very least 8.75%. Low IPCA mid-March print suggests COPOM's gamble working for now.

Key Levels: USD/BRL 1.85, 1.90 on the upside and 1.80 on the downside.

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