The Brazil trade continues to work with equal lifting coming from both the currency and the Ibovespa. In total return you have seen a 14% move off the lows on Dec 16th with the drivers being.
- Dilma trying to make structural reform – yes, that’s right real reform in Brazil (EWZ, quote). It hasn’t happened and won’t happen overnight but even lip service on budget cuts announced last week is impressive
- Emerging Market currencies overall laughing the face of a stronger U.S. Dollar (UUP, quote). The DXY strength is clearly and Euro & Yen phenomenon for now. Since the December lows the USD has fallen against key Emerging Market crosses:
- 70 to 11.40 in ZAR
- 40 to 2,32 in TRY
- 80 to 14.60 in MXN
- 50 to 61.50 in INR
- 1120 to 1182 in KRW
- Commodities grinding into a base
- Better China (FXI, quote) data
- Brazilian banks sowing better loan figures and reasonable NPL measures
This won’t be pretty or a straight line but Brazil will catch many off guard in 2015 with its constructive performance.
