Brown Brothers Harriman & Co., Credit Agricole SA and Rabobank see Brazil’s real weakening beyond 4 per dollar in the coming weeks. The currency sank 2 percent to 3.8554 at 4:36 p.m. in New York after Standard & Poor’s cut the nation’s credit rating to junk.
* The downgrade rekindled speculation that Finance Minister Joaquim Levy will resign in frustration at the difficulty of winning support for fiscal measures to shore up the budget.
* “We will see a move north of 4 in the near term as the situation in Brazil is likely to get worse before it gets better,” said Christian Lawrence, a currency strategist at Rabobank in New York. “The big question now is Levy, the impact of him leaving would be huge. I’m not sure if the downgrade itself does that, but clearly the risk of a departure has been rising.”
* “We could see a move to 4.50 over the next few months as news keeps getting worse,” said Win Thin, the New York-based global head of emerging-market strategy at Brown Brothers Harriman.
* “I doubt the downgrade will be a wakeup call,” Mark McCormick, a foreign-exchange strategist at Credit Agricole said from New York. “The focus now shifts to whether Moody’s and Fitch will react, which will hinge on the government reaction and the state of the economy. Overall, we expect fresh actions from other agencies over the next 6-9 months, adding new headwinds to the real.”