Fiscal risks and weak growth add pressure to BRL

Brazil's economic activity continues to collapse and political commitment to push forth the necessary structural reforms remains lacking. Rising term premia due to fiscal concerns coupled with increasing market value of liabilities arising from a weak BRL pose nonnegligible risks to a sudden stop in the months to come. These add to negative global factors of weak China growth, commodity prices and Fed tightening. 

"Further cheapness in BRL compared with our BEER model (17% cheap as of now) looks warranted until a meaningful leadership reshuffle of the current administration takes place, in our view. We remain long USDBRL through a three-month call spread", says Barclays.