Brazilian real rebounds slightly thanks to optimism in the raw materials market
The Brazilian real strengthened for the first time this week, rebounding from the previous session’s historic lows, while most other Latin American currencies also strengthened on Friday on signs of easing tensions between the United States and China.
Beijing said Sino-US trade negotiators had agreed to improve the atmosphere for the implementation of a Phase 1 deal, days after President Donald Trump threatened to impose new tariffs.
“The last thing global investors need right now in the context of the global coronavirus pandemic is a boost from the increased risk of a trade war,” wrote Han Tan, market analyst at FXTM.
Data showing that the US economy lost fewer jobs in April than expected due to the coronavirus crisis also heightened sentiment, keeping the dollar at bay.
The Brazilian real rose 1.4% to 5.76, but the previously unthinkable 6.00 against the dollar was still in sight. The currency plunged to new lows on Thursday after the central bank cut interest rates deeper than expected.
Arguments for further cuts were reinforced on Friday by official figures showing that inflation in April sank to 20-year lows.
American-Chinese optimism has spread to the commodity markets, which has contributed to the rise in Latam markets dependent on commodity prices.
The currencies of Mexico, Colombia and Chile all increased by more than 1%.
Equities followed suit, with those of Brazil leading the way. The Bovespa index of Sao Paulo jumped 2% thanks to generalized gains. Mexican stocks rose 0.9%, while Chilean stocks extended their gains for the fourth consecutive session.
In Argentina, the markets were filled with uncertainty, as the deadline set by the government for bondholders to accept its offer to restructure the debt was only a few hours.
The double economic crisis and the debt crisis have created a huge gap between the official rate of the Argentine peso, kept almost static by capital controls, and the collapse of the black market and other unofficial rates.