Brazilian Real Demand Rises as Commodities Rally Strengthens

The Brazilian currency continued its rally against the dollar, euro, as the demand for commodities continues to rise on improved economic conditions mainly in Asia, spurring demand for assets in emergent markets.

Since the price of commodities rebounded as the global slump started to show its first signs of recovery, the Brazilian currency is witnessing an impressive rally fueled by a combination of favorable factors in the global financial system and economy, to the point that the national central bank eventually buys foreign currency to avoid the real to strengthen excessively, like happened this Thursday. Two-thirds of Brazilian exports are commodities, being these mainly oil, iron ore and soybean, and their price increase is helping the real to hit record highs on a weekly basis, being one of the most profitable currencies for traders since the global recession started to ease, two months ago.

The rise in commodities has been helping the Brazilian Stock Exchange to rebound after a deep bearish trend in which it lost more 30 percent of its highest value before the crisis, and following commodities and stocks, Brazil’s real is showing an unique performance against most of currencies. Analysts reaffirm that as long as the optimism continues, investors will tend to buy higher-yielding currencies like the real, and the growing demand for commodities will continue to boost the Brazilian currency attractiveness.

USD/BRL traded at 1.9353 from 1.9417. EUR/BRL slid to 2.7170 from 2.7530.

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