<< The Brazilian Real strengthened to an eight year high overnight as commodity prices continued to rise. We continue to favor currencies which export commodities, and Brazil continues to increase exports. Chuck had told readers about two recent discoveries of oil and gas deposits in Brazilian fields. One field alone is estimated to contain up to 8 million barrels of oil, a little less than the entire reserves of Norway.
The discovery of these fields have the potential to put Brazil among the world's biggest oil producing countries. But oil isn't the only commodity making the news in Brazil. Cia Vale do Rio Doce, the world's biggest iron ore producer, yesterday won a 65 percent increase from the largest Asian steelmakers, reflecting rising demand for the main material used to make steel.
Interest rates also favor the Brazilian Real. Brazil's real interest rate, or the difference between the benchmark lending rate and annual inflation is the highest in emerging markets, with Turkey having the second highest. In the US, the real rate is negative 1.1%, so it isn't hard to see why investors are looking at this emerging market for additional investments.
Increases in commodity prices will also support one of our favorite currencies, the Australian dollar. While Brazil is home to the world's largest iron ore producer, Australia is still the main supplier of commodities to China, the world's largest consumer of raw materials. The Aussie dollar also got a boost from a report that wages accelerated in the fourth quarter, increasing pressure on the central bank to raise interest rates as early as March. >> http://thedailypfennig.com
In another report this morning, the BRL was at 1.736 per U.S. dollar, near its strongest level since March 2000.
Looks like a 90,000 share block purchase just went through AH at 120.54. Probably a hedge fund desperately closing a short position. There was a surprising amount of buying near the close today, probably by guys who shorted up around 118-119 and expected PBR to do it's usual dip down from that price range. But that didn't happen today so shorts are getting out of the way of tomorrow's opening. I think we'll see 124 later this week.
<< The real BRBY<BRL=> gained 0.93 percent to 1.709 per U.S. dollar, its strongest since May 1999. The real advanced even though the central bank intervened to buy dollars on the spot foreign exchange market.
"It's hard to tell how much further the real could gain, but it's safe to say the outlook is for the currency to stay strong because of trade and financial flows," said Antonio Madeira, an economist at consulting firm MCM Consultores. "In terms of trade, commodity prices continue strong."