February 2020 Review


February saw the USD/BRL move to unprecedented levels 4.50. This trend looks set to continue into March.

The Brazilian finance minister, Paulo Guedes, made it clear that Brazil is not worried about a weaker currency. In a statement on 12th February he said that Brazil has ‘abandoned’ high rates and a strong currency for low rates and a weak currency.

President Jair Bolsonaro continued to clash with congress over tax and administrative reforms. This also worried local and international investors about the governments ability to actually deliver meaningful reforms.

Can Brazil ultimately deliver on much-needed reform? We think and hope that they can, however, this may be done while we adjust to a ‘new-normal’ exchange rate environment.

Felipe Pellegrini from Banco Travelex expects a 4,40 – 4,50 USD/BRL rate if the market can find stability. To move down below 4,40 would require a ‘lot of good news’.

The USD/BRL futures market has seen some bets for a 5 to 1 exchange rate going out over 6 – 12 months. This is no indication that it will reach these levels however it is an indicator of a likely global recession due to Coronavirus.


The Coronavirus is completely dominating market sentiment. Globally, all currencies aside from JPY,CHF and USD, have lost value. EM* currencies have felt the pain as it is not clear how the virus will affect global supply chains and corporate profits. Until this has been established, expect more pain.

Safe haven currencies have seen huge inflows – USD, JPYand CHF. The US has seen massive inflows into its local bond market which has seen the USD rise against most global currencies. While Coronavirus fears remain

GBP/USD – the pound weakened to 1.27 as the UK threatened to walk away from Brexit talks in June if a good deal is not forthcoming.
EUR/USD – At month end EUR/USD was at 1.10, practically unchanged from January.
USD/JPY – The JPY increased to multi-month highs(112) during February but gave back gains towards the end of the month.


Gold has risen in all currencies since January and continued to remain stable into February. Investors looking to take profit started selling on the final business day of the month putting pressure on prices. Global traders will also be under pressure to create liquidity to pay for any margin calls that have occurred due to the stock market sell-off.
Bitcoin declined almost 10 % in February and sold off due to to profit taking and a general global sell-off in assets due to Coronavirus fears.

EM – Emerging Market
JPY – Japanese Yen
CHF – Swiss Franc

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