LONDON: The Brazilian real could be due a change in fortune against the dollar after its lengthy slide from 1.7067 on Feb 29 to last week's close at 2.0980.
After the real weakened past what is considered to be the limit of an informal 2.0-2.10 per dollar trading band recently enforced by the central bank, Treasury chief Arno Augustin said the exchange rate was at a level closer to what is best for the local economy.
While that signifies the Brazilian government favors a weak real to help boost Brazil's lagging industrial sector, it might also signify that Augustin feels the local currency's depreciation may have gone as far as it should.
Therein lies the risk for traders.
Brazil's central bank notably ended a year of aggressive interest rate cuts on Wednesday leaving its benchmark rate unchanged at a record low but still eye-catching 7.25 percent.
The central bank's decision was predicated on the fact that the current interest rate would help contain inflation pressures that saw price rises quicken to 5.64 percent in the month to mid-November up from 5.56 percent one month before.
If the central bank is showing more concern about inflation worries than about Brazil's uneven economic recovery, the market may construe that to mean the authorities feel the slide in the real has gone far enough.
A weak real encourages import price inflation by making imported goods more expensive in local currency terms.
It is also possible that data due on Friday will show Brazil's economy expanded in the third quarter at its fastest pace in more than two years, as forecast in a Reuters poll of economists. If so, that could ignite some speculative demand for the Brazilian real.
Even if the data, due at 1100 GMT, is "nothing spectacular", as Finance Minister Guido Mantega said, the government is preparing to unveil more stimulus measures, including tax breaks.
Brazil's 7.25 percent yield is beguiling, but perhaps of greater interest are possible intimations that Brazil's policymakers may feel the real has weakened far enough.
Traders may feel a move lower in the dollar/real exchange rate back towards the 100-day moving average, currently 2.0367, might be in the offing.
— Neal Kimberley is an FX
market analyst for Reuters. The opinions expressed are his own.
Brazil's real due a rally against dollar
Brazil's real due a rally against dollar
GCC chambers plan Gulf Guarantee project to boost intra-regional trade
DAMMAM: The Federation of GCC Chambers, in cooperation with the Customs Union Authority, intends to launch the Gulf Guarantee Project to provide a unified mechanism for exports and trade transactions and to enhance the efficiency of intra-GCC trade, which reached about $146 billion by the end of 2024, Saleh Al-Sharqi, Secretary-General of the federation, told Al-Eqtisadiah.
Al-Sharqi said, on the sidelines of his meeting with media representatives at the federation’s headquarters in Dammam, that the initiative represents a qualitative leap in supporting intra-GCC trade by facilitating transit movement through a single point, contributing to cost reduction, accelerating the flow of goods, and enhancing the reliability of trade operations among Gulf markets.
He explained that the federation recently launched a package of strategic initiatives, including the Tawasul initiative aimed at strengthening communication among Gulf business owners and supporting the building of trade and investment partnerships, in addition to the Gulf Business Facilitation initiative, which seeks to address challenges facing Gulf investors and traders, simplify procedures, and improve the business environment across member states.
He noted that these initiatives fall within an integrated vision to address obstacles hindering investment and intra-regional trade flows by developing regulatory frameworks, activating communication channels between the public and private sectors, and supporting Gulf economic integration in line with the objectives of the Gulf Common Market.
In a related context, the Secretary-General affirmed the direction of GCC countries to leverage artificial intelligence technologies to support trade and investment flows, stressing the importance of establishing a unified Gulf committee for artificial intelligence to coordinate efforts and exchange expertise among member states. He said the federation will support this direction in the coming phase, drawing on leading international experiences, particularly the Chinese experience in this field.
Regarding the recently announced electric railway project between Riyadh and Doha, Al-Sharqi revealed that technical and advisory committees are working to complete the necessary studies for the project, confirming that it will positively impact passenger and freight movement between the two countries, enhance Gulf logistical integration, and support regional supply chains.
On investment opportunities available to Gulf nationals in the Syrian market, he said the federation is coordinating with private sector representatives in Syria to overcome obstacles that may face the flow of Gulf investments, in addition to working to provide adequate guarantees to protect these investments and ensure a stable and attractive investment environment.
In response to a question from Al-Eqtisadiah about the impact of tariffs imposed by the US on imports of iron, steel, and aluminum, he said that economic and technical committees in GCC countries are continuously monitoring the repercussions of these tariffs on the Gulf private sector, assessing their effects, and taking the necessary measures to protect it from any potential negative impacts.
Al-Sharqi also pointed to the launch of two specialized committees in the transport and logistics sectors and in real estate activities, given their pivotal role and active contribution to Gulf gross domestic product, stressing that developing these two sectors is a fundamental pillar for enhancing economic diversification and increasing the competitiveness of GCC economies.
He added that during the past year the federation held more than 40 meetings and official engagements with Gulf and international entities, participated in nine regional and international events to strengthen the presence of the Gulf private sector on the global stage, and signed 12 agreements and memoranda of understanding with Gulf, regional, and international entities to open new horizons for economic and investment cooperation.
During the same year, the federation launched four digital platforms to support the Gulf private sector, bringing the total number of its digital platforms to eight serving the business community across member states.
The Secretary-General affirmed that the federation will continue working with relevant economic entities to unify procedures and regulations, reduce non-tariff barriers, and accelerate mutual recognition of products and standard specifications, in a way that enhances the competitiveness of the Gulf economy and supports the growth of intra-GCC trade.
