Dollar holdings

06/21/23 @dt1380.  A lot depends on your time horizon.  the USD has lost over 8% of its value against the BRL so far this year; our income for the moment is in USD, and between that and the level of  Brazilian inflation, we've had to do some moderate retrenching.

However, aside from spending less, I'm not making any other changes right now.  Comparing the relative strength of the two economies, I think that the BRL is overvalued, perhaps seriously overvalued, and that its current premium is unsustainable.  So I'm waiting it out.  But my time horizons are very long.

Very difficult to predict at the moment. At the beginning of this year the dollar was at almost 5.5, but now is below 4.8. It may fall even further, and many are predicting this, but I do remember many years ago when it was only 1.6, but I am certain it will not go that low...!!!

Great question.

I don't have a strong opinion on the future value of the Real.  If I were to guess, it will continue to trend slightly higher this year, and who knows thereafter. A lot depends on interest rates in the US vs those in Brazil,  the perceived country risk, commodity values (as Brazil is a big commodity exporter), and export partner economic strength.

Here is a pretty in-depth and recent round up on analyst opinions:

https://www.infomoney.com.br/mercados/dolar-abaixo-de-r-450-ou-de-volta-para-r-5-o-que-esperar-apos-a-moeda-atingir-as-minimas-em-mais-de-um-ano/

@abthree I agree with your assessment. If you look at the economic conditions it appears that the real is being driven mostly by speculation and the manipulation of big investors making profit on the volatility. They trade in vast quantities that affect the price and then less sophisticated people buy or sell based upon what they believe is a real trend.  Kind of like crypto currencies. It's smoke and mirrors.

Also, it's not so much that the real is really getting stronger, it's that the dollar is becoming weaker, based upon inflation and interest rate hikes.  Also, people keep predicting a US recession, which still hasn't happened, and the Fed just announced they expect a soft landing, so I would anticipate that will help rather than hurt the dollar.

@abthree

Yes, l understand ...always difficult because BRL is so volatile, in last 12 months the euro has moved between 5 and 5.7...but even at 5, it's pretty good compared to a few years ago ..Wise are currently paying 4.13 on dollar deposits, 3.94 on GBP and 2.53 on Euros ....question is ,what is the longer term outlook ?

@BRBC

Very useful ...thanks

Also, it's not so much that the real is really getting stronger, it's that the dollar is becoming weaker, based upon inflation and interest rate hikes. Also, people keep predicting a US recession, which still hasn't happened, and the Fed just announced they expect a soft landing, so I would anticipate that will help rather than hurt the dollar.
-@mikehunter

With respect to whether the Real is gaining or the Dollar is loosing, the DXY measures the value against 6 other major currencies, and is considered the primary means of measuring the Dollar's value. Using that measure as an anchor, it would seem the Real is actually getting stronger relative to the Dollar.

The US Dollar Index, DXY, is down only about 1.5% year to date, whereas the USD/BRL is down a bit over 9% YTD (or you could also look at it as the BRL/USD is up over 10% YTD).

I'm not sure that it matters that much for all of us, because the net effect is the same on people using USD for purchasing power in Brazil. 

That said, it is (sort of) an indication of confidence in the BRL, or perhaps more accurately the Brazilian economy/markets.  The same link in my last post references significant capital inflows from overseas investors. BRL 14.5B this year so far and BRL 7.7B this month alone, so it would seem the trend is accelerating in the very short term.

06/21/23 @dt1380. A lot depends on your time horizon. the USD has lost over 8% of its value against the BRL so far this year; our income for the moment is in USD, and between that and the level of Brazilian inflation, we've had to do some moderate retrenching.
However, aside from spending less, I'm not making any other changes right now. Comparing the relative strength of the two economies, I think that the BRL is overvalued, perhaps seriously overvalued, and that its current premium is unsustainable. So I'm waiting it out. But my time horizons are very long.
-@abthree

No economist here, nor a Forex Operator, but here are a few factors on our Forex Market that has been driving the dollar down...

1.The new agreement with China to trade on their own currency.  We export quite a lot of commodities to China, and plenty food stuffs.   And we do import quite a lot of manufactured products from China.  So now, the Dollar is entirely out of the picture.  Brazil trades more to China and Middle East Countries than it does to the US. 

2.Fewer Brazilians traveling abroad. There is a looming recession there.   That is not a huge in currency demand, but comes into factor. 

3.We are importing less from NAFTA Countries.  Less dollars needed to consummate transactions.

4.Our bonds are more actracive than Dollars.The Selic at 13,5% per anum, why bother to stash dollars on your safe ? 

5.The BRICS agreement is not a direct factor for now, just another pie-in-the-sky. But in terms of FOREX markets, it drives speculation. So traders tend to dump dollar positions at rumors such as those.

It could slide further down before it bounces back.