Brazilian Real Declines on Economic Outlook

After touching a one-year high versus the greenback this week, the Brazilian currency declined in a corrective movement, as speculations suggested that the wealthiest economy in South America may not provide support for extensions in the current real’s rally.

Even after posting a report indicating growth for the last quarter in Brazil, the real did not manage to extend its gains after touching a one-year high previously this week, as corrective movements and speculations regarding the future of the Brazilian economy weighed on the real’s outlook, which lost more than 1 percent versus the greenback towards the end of this week’s session.

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Dollar Posts Sharpest Fall in 5 Months Versus Majors

The dollar had the sharpest decline since May versus most of the 16 main traded currencies as the U.S. currency is having its attractiveness decreased since borrowing costs declined, forcing investors to look for yield in other markets around the world.

Several reasons extended the gains of multiple currencies versus a weakened and less attractive U.S. dollar, as mainly evidences of a global economic recovery are playing a fundamental role behind this week’s dollar downtrends. The Great Britain pound managed to hit a one-month high versus the greenback after the Bank of England finally declared that a asset-purchasing program that lasted for months to stimulate the weakening British economy will not be extended, helping traders to be more confident into buying pound-priced assets. The yen also climbed intensively versus the dollar as China’s economic figures suggest that the Asian growth outlook will improve, inviting Japanese exporters to repatriate capital invested overseas.

Analysts indicate that the current outlook for the U.S. currency is bearish and is likely to remain so, as long as bullish patterns continue to be fueled by favorable economic reports worldwide. The borrowing costs of the dollar also are affecting negatively the greenback, since it has become more attractive to traders opt for diversification of their portfolios regarding currency funds

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