Emerging market currencies are under pressure on Monday; USD/BRL is up 1.85% at 5.35. Since June, the pair has steadily risen. Rabobank analysts see USD/BRL ending the year around 5.25.

Key quotes:

“After the Fed released the latest FOMC meeting minutes, two Fed hawks said they would slow the pace after the July meeting decision, while June payroll surprises again on the rise. Domestically, June CPI inflation is starting to show the temporary impact of the fuel tax cuts from the recently approved PLP18 bill, but the key vote on the benefits bill has been postponed until next week. Over the week, the DXY dollar index appreciated by 1.8%, the USDBRL ended up appreciating by 1.5% (although it closed the week at 5.2559, the same level of the June 30), the Ibovespa appreciated by 1.4%, while the local inverted yield curve steepened. ”

“We still expect a 50 basis point upside at the August meeting and then probably stay put through the end of the year. At the start of 2022, we believe that the recent display of Fed hawkishness and the intensification of the traditional election cycle will eventually weigh on the BRL and other local assets going forward. , we expect the BRL to trade at 5.25.”