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Brazilian Real Weakens Despite Rise in Foreign Direct Investment, Soybean Exports

July 28, 2020 at 16:41 by Andrew Moran

Brazilian coins on 50-real billsThe Brazilian real is weakening against the US dollar and several other major currency counterparts on Tuesday, despite positive domestic economic data. The real has rebounded since hitting a record low against the greenback in May, but jitters in global financial markets may be hitting the pause button on emerging market currencies.

According to central bank data, foreign direct investment increased for the third consecutive month in June to $4.75 billion, up from $2.55 billion in May. The market had penciled in a total of $3.58 billion.

Brazil’s current account surplus transitioned into a $2.24 billion surplus last month, up from a $2.66 billion deficit in June 2019. But the increase did fall short of the median estimate of a $3.8 billion surplus. The goods surplus ballooned to $6.9 billion, while the services deficit slipped to $1.37 billion.

Overall, the South American nation’s trade deficit plummeted to $9.73 billion in the first half of 2020.

On the employment front, the Brazilian economy lost 10,984 jobs last month, an improvement from the more than 350,000 lost jobs in May. Agriculture and civil construction saw the biggest gains, with 36,836 and 17,270, respectively. Trade and services shed 16,646 and 44,891 positions, respectively. In total, Brazil has wiped out close to 1.2 million jobs in the first half of the year.

The country’s soybean market continues to boom thanks to a depreciating real, according to new figures from the trade department. Its soybean shipments rose 15.5 million metric tons in May and 16.3 million metric tons in April. Its biggest customer was China, with 70% of its exports going to the world’s top soybean consumer. Chinese importers took advantage of a weaker real and lower freight rates.

Meanwhile, Brazil continues to report major spikes in confirmed COVID-19 cases. After reporting approximately 25,000 new cases on Monday, the nation now has 2.45 million infections, with a death toll of more than 87,000.

The USD/BRL currency pair advanced 0.28% to 5.1665, from an opening of 5.1518, at 16:36 GMT on Tuesday. The EUR/BRL jumped 0.11% to 6.0623, from an opening of 6.0507.

If you have any questions, comments, or opinions regarding the Brazilian Real, feel free to post them using the commentary form below.

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