Brazilian Real Falls from Eight-Month High as Stocks, Commodities Drop

Brazil’s Real had the largest drop in six months falling 2.2 percent against the U.S. dollar and declining from an eight-month high, as commodities and stocks declined, reducing capital influx to South America’s most influential economy.

After a rocketing rally that made the real to rise 24.6 percent since March 2, the real tumbled the most in six weeks, after a negative day in stock and commodities markets. The main reason that affected the real’s price this week was the remittance of profits from foreign investors that purchase assets in Brazil’s BOVESPA, the main national stock exchange market, which due to its highly volatile profile, attracts investors that often buy assets in a down market, sequentially selling it after hitting a target price, returning the capital to its country of origin, like happened this Wednesday.

Brazilian specialists relate the U.S. dollar’s gains against several currencies to the real’s decline. Brazilian exporters trade mostly using the greenback, and the outflow of profits from the national stock market also weighed on the South American currency. The real may continue its rally against the dollar, euro and the pound, as long as the commodity market remains heated, spurring demand for Brazilian exports and attracting investors to the stock exchange market.

USD/BRL traded at 1.9640 from 1.9267, the sharpest rise in six weeks, while the EUR/BRL rose from 2.7587 to 2.7811.

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