BRL during the Summer Olympics 2016

September 1, 2016

The FIBO Group financial experts were keeping a wary eye not only on the sports achievements of the Olympics in Rio, but also on the national currency of the Olympics venue – the Brazilian real.

The 2016 Summer Olympics were held from 5 August to 21 August. During that time the Brazilian real (BRL) strengthened significantly against the US dollar. However, the sellers managed to take the considerable part of the previously lost positions back by the end of the tournament. Moreover, it is important to take into account that traders trade not only facts but expectations as well. As practice shows, the activity on the financial markets may increase significantly by trading on expectations. And there was no exclusion in this case – the Brazilian real had started to strengthen actively even prior to the Summer Olympics opening ceremony in Rio de Janeiro.

That was a pretty much expected market reaction as the abnormal influx of tourists such as athletes, their supporters, as well as the overall investment fund would, obviously, help to support the national currency.

Therefore, at the beginning of July the exchange rate for the currency pair USD/BRL reached the maximum level of 3.6260. Although, by the middle of the Olympics, August 10-11, the currency pair rate reached its minimum at 3.1160. Thus, it can be noted that the strengthening of the Brazilian currency was slightly more than 14% in the first 8 weeks of the summer. However, by now the buyers of the USD/BRL currency pair have managed to recover a part of the earlier lost positions, as the prices reached 3.2460/80, which is the maximum level before the opening of the Olympics.

Moreover, the traders should consider the fact that weakening of the currency pair prices was caused not only by the strengthening of the Brazilian currency, but also weakening of the US dollar. Therefore, the end of the Summer Olympic Games would become a negative factor for the Brazilian currency, as the outflow of tourists would reduce the demand for BRL, thereby providing the additional support for the currency pair prices. At the same time, the potential of the US dollar strengthening in the medium term would contribute to the strengthening of the currency pair.

The return of the prices to the level of 3.2200/150 cancels the “bull” trend and we may anticipate further weakening of the currency pair prices.

The most recent analytical reports can be found on our website.

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