📝 Recommending Long BRL/ZAR Position After Election: Goldman Sachs Strategy

Recommend our clients to go long BRL/ZAR.

On our metrics, no currency outside of Asia is more exposed to further yuan weakness than the rand. Given the real’s high ‘beta’ to global risk sentiment, in our view BRL longs are best expressed when paired against another risk-sensitive currency, especially one that features lower carry, lower exposure to a still-strong US activity growth picture, and higher exposure to activity and FX wobbles in Asia.

Monday's weakness in the real gives opportunity to reengage with BRL longs. We see encouraging signs that domestic volatility after the vote could be limited as elections results have been widely accepted. Once domestic uncertanty drops, there could be further upside for the currency.

- Goldman Sachs Strategy