Credit Suisse updates Brazil to ‘overweight’ after currency rise

Credit Suisse ‘overweight currency
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While decreasing exposure to European countries, economists at Credit Suisse raised its rating for emerging nations, mainly due to the increase in foreign capital flows in recent months. In addition to highlighting China and Mexico, the bank also upgraded its rating on the Brazilian market to “overweight.”

“Brazil’s key to above-average performance is the Real; 80 percent of the time the currency appreciates, Brazil performs above average,” wrote Andrew Garthwaite, chief global strategist at Credit Suisse.

According to the institution’s calculations, the Brazilian currency has performed 9.4 percent above the DXY index since November last year. In February, the U.S Dollar even dropped below BRL 5 for the first time in months, even though it recorded bullish sessions amid tensions between Russia and Ukraine.

Mr. Garthwaite also pointed out that when the Real appreciates against the greenback, the country enters a positive cycle, as a strong currency helps to decelerate inflation and interest rates in the country. 

“And lower interest rates supported by a stronger Real improve the country’s fiscal position,” the report highlights. This is fundamental, especially when considering that Brazil’s net debt reached 91 percent of GDP in 2021, the highest percentage among emerging countries.