The Brazilian Real melts....

The Brazilian Real fell to eight week lows on the back of speculation that interest rate cuts are near. Yesterday we saw Industrial Production fall 1.7% after expecting flat. This caused yields to tumble 60-70bp alone the curve. Despite the best efforts of the Central Bank the currency could not get a foothold. The CB sold dollars at two auctions and lent another 1.96 billion dollars to exporters in a separate offer in an attempt to slow down the free fall. It did little good. After the 150bp cut in rates by New Zealand today the market is preparing for a move by the Brazilian CB as early as next week. Certainly the DI curve expects this to happen. Commodity prices, which account for 2/3 of Brazil's exports are also off over 50% from July 2008 highs which is not helping the currency at all.

This is a trend I dare not stand in front of. For now as I wrote about earlier this week I am staying on the sidelines until a little more liquidity enters the markets.

Good Luck and Good Currency Trading.