Dollar Remains Range-Bound
However, investors should not read too much into Tuesday's data since it will be heavily distorted by the carnival holidays. More importantly, President Dilma is scheduled to speak at 10am local time (9am EST) and is widely expected to announce further measures to boost growth.
Locals speculate that the announcement will focus on tax measures to boost the industry along with additional funding for the development bank BNDES by as much as R$30 billion. The automobile sector is thought to be one of the greatest beneficiaries.
The Bovespa outperformed most global bourses in expectation of the measures but the BRL underperformed as some feared foreign-exchange-related measures may also creep into the new package.
We think USD/BRL will stay above the 1.80 level for now, but we expect the pair to gradually make its way back toward the 1.75 later in the year.
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