Considerations on Our Exchange Rate Revision to R$ 5.40 for 2024
Internal and external factors are expected to contribute to the BRL remaining at a depreciated level for the rest of this year. The postponement of the Fed Funds rate cuts to December – which favors the interest rate differential between the US and major advanced countries – contributes to the continued strength of the dollar. Thus, a scenario with few factors for a significant weakening of the DXY in the coming months is shaping up.
Domestically, the balance of payments has been negatively affected by the decline in the trade balance of goods and services, with a notably strong dynamic in the physical quantity of imports.
All of this, combined with the worsening of financial flows on several fronts, are elements that should hinder the performance of the Brazilian currency compared to its peers. Additionally, there is a scenario of greater domestic risk aversion, possibly explained by the political noise and controversial signals from the government on fiscal matters over the past two months. Considering all these elements, we have revised our exchange rate projection from R$ 5.20 to R$ 5.40 for 2024.
The current account deficit is expected to reach 2.0% of GDP this year (excluding crypto asset imports), which is close to 3% of GDP when compared to the current statistic of a 1.8% GDP deficit over the last 12 months. This represents a considerable worsening of the current transactions in the Balance of Payments from now until the end of the year, even when excluding crypto assets.
For more information, please check our Special Report.
