Brazil’s exchange rate may weaken to 2.40 reais per U.S. dollar in one to two years after the Federal Reserve signaled it may pare back monetary stimulus, said David Beker, the chief Brazil economist at Bank of America Merrill Lynch.
Brazil’s economy shrank in the third quarter more than analysts forecast as above-target inflation, deteriorating fiscal accounts and rising interest rates sapped confidence and crimped investment. Swap rates fell.
The cheapest Brazil inflation-linked bonds in 14 months are prompting Bank of America Corp. and SulAmerica Investimentos to recommend the debt on concern President Luiz Inacio Lula da Silva’s successor will fail to keep consumer prices in check.
Brazil’s industrial production rose for the second consecutive month in July, the first back-to-back increase in more than a year, cementing economist expectations that growth is accelerating as a result of stimulus measures.