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Big fall in Brazilian real is behind us but sustained rally unlikely

Having been one of worst performing EM currencies in 2013, the Brazilian real has been one of the best performers so far in 2014, prompting speculation that it will strengthen further from here. We’re sceptical. While much of the necessary adjustment in the real has now occurred following the hefty falls seen in 2012-13, we think it is still more likely to weaken than strengthen over the next 6-12 months.

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