Intervention

The Brazilian central bank has been active in the open markets, buying dollars and selling reals, in an attempt to stem the appreciation of the real. But analysts note that as in all currency markets with strong trends, while central banks might be able to slow them down or smooth them out, they are usually unable to stop them. Overall, most economists expect the underlying strong fundamentals to allow additional real appreciation throughout 2005.

While the real was trading around 2.75 in mid March, BNP Paribas’s de la Fuente saw potential for the real to move to 2.52 over the next six to nine months.

“The trade flows are still phenomenal,” he says.

Economy.com’s Coutino noted that last year, the Brazilian currency appreciated almost 5 percent, and he predicted that the real could see another 3 percent appreciation this year.