Monday, October 13, 2008

Brazil lowers Reserve Requirements

The BACEN announced the third round of measures to address the tightening of cred conditions in Brazil. The BACEN announced the suspension of reserve requirements on time deposits and leasing companies.

This is a very positive reaction to the market situation and as such should be viewed as positive. Today the Bovespa was up 14% and the currency closed at limit down (2.1835 BM&F). Remember three days last week it closed limit up!

There are many that are calling for a 50bp rate rise on Oct 29. I am not sure that will happen but, if done, add to a positive reaction for the Real. Therefore I am currently short Usd/Brl at 2.2100(BMF). I have no level for T/P but will stop myself out above 2.2800(BMF). I think it is still to early to think we are out of the woods and as such would think the Central Bank would hold off on and rate rise.

Good Luck and Good Currency Trading

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