Brazilian markets are closed for the Columbus Day holiday, therefore the offshore NDF market is the only game in town. Spot is being indicated at 2.1495-05, 1-mth NDF is 2.16 30-50, which implies the Nov BM&F date is at 2.1590/10. Normally when the BM&F is trading the spreads would be 10pts. Yesterday afternoon's early close saw the front contract going out at 2.1692, so today's indications show the Real up about a big figure from yesterday.
NY EM Forex traders report that all EM currencies are "bid", or firm this morning, and that even the slightly disappointing 50bp SARB hike could not dampen traders' enthusiasm. There were reports of US hedge funds loading up on MXN around the 10.9550 level this AM, and adding whatever EM they could (at reasonable prices) to their shopping carts. The fact that USD/ZAR could not sustain its 7.7150 highs registered post- SARB announcement, and has reversed trend on the day and is trading at the lows (7.5875) has gotten NY EM Forex traders" attention.
With this leitmotif, and the superior yield in BRL, we expect to see more downward pressure on USD/BRL, and with no BACEN in today for a "snap auction" the usual buyers are absent. On the other hand the heavy weight of onshore export dollars is also absent. Either way, for now EM markets look in good shape.
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