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Stabilizing EM Outlook Pushes Brazilian Real ETF to 5-Month High


With investors embracing emerging markets again, the Brazilian real currency exchange traded fund is approaching a five-month high as foreign investors jump back into Brazil and capitalize on the higher interest rates.

The WisdomTree Brazilian Real Fund (BZF) was up 2.2% Tuesday. BZF has gained 7.2% year-to-date.

The Brazilian real was trading around 2.265 BRL per USD Tuesday. On March 27, the currency rallied to 2.2589, its strongest since Nov. 4, reports Filipe Pacheco for Bloomberg.

“The real is benefiting from the inflows of foreign investments in the past few weeks,” Tarcisio Joaquim, currency director at Banco Paulista SA in Sao Paulo, said in the article. “There has been a better sentiment toward emerging economies lately.”

The Ibovespa Brasil Sao Paulo Stock Exchange Index has surged 11.5% since the March 14 low. Meanwhile, the iShares MSCI Brazil Capped ETF (EWZ) jumped 15.4% since March 14, but the ETF is only up 0.8% year-to-date.

The Brazilian real and equities markets have been under pressure in recent months after a bout of volatility induced sell-offs. [Technical Woes Seen for Brazil ETF]

A surge in inflation and the plunge in the Brazilian real late last year also weighed on Brazilian assets. However, policy makers hiked benchmark borrowing costs by 75 basis points to 10.75% this year, the largest increase among major economies after Turkey.

“High interest rates open space for arbitrage with the currency,” Hideaki Iha, a foreign-exchange trader at Fair Corretora in Sao Paulo, said in the article. “The real benefits from that.”

WisdomTree Brazilian Real Fund

For more information on Brazil’s currency, visit our Brazilian real category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.