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Brazilian real set for resilience as portfolio inflows near highs
BNY analyst Geoff Yu said BRL portfolio inflows are near post-COVID highs ahead of Brazil’s Selic decision, with demand strongest for equities and government bonds.
BNY’s Geoff Yu said Brazilian portfolio inflows are close to post-COVID highs ahead of the upcoming Selic rate decision, supported by renewed terms of trade interest, strong equity demand, and continued purchases of Brazilian government bonds, according to FXStreet.
Yu noted that FX conviction is limited because FX volumes are exceptionally low and currency positioning is effectively neutral. FXStreet reported that iFlow data point to the broader inflow cycle having peaked in April, with the financial account more likely to stabilize than reaccelerate.
The analyst said the recent sharp spot outflow looks transaction-driven rather than evidence of a wider reversal, given an otherwise constructive asset flow backdrop. Housing and government bond inflow should remain the main anchor for Brazil’s external liability position, FXStreet added.
BNY also highlighted that momentum remains positive for carry demand but warned that duration is the key challenge, pointing to the current Fed backdrop and a steeper U.S. Treasury curve that may be more supportive for front-end exposure. FXStreet reported that the pace of deterioration in Brazil’s financial account eased in July, though the broader direction remains down, with combined inflows peaking in April.