Brazil: Moody’s places rating on review for downgrade to junk

By FXStreet FXStreet (Córdoba) – The rating agency Moody’s placed Brazil Baa3 under review for a downgrade. If materializes, even by only one notch, the country would lose the investment grade from Moody’s. Standard and Poor’s downgraded Brazil to junk in September. A grade below IG by two of the three rating companies could forced large liquidations of assets denominate in reals (BRL).

Despite the news, the real continued to trade in positive territory against the US dollar, but attention now turns to tomorrow’s trade in Brazil, where the real could face bearish pressure. USD/BRL moved of daily low and rose from 3.73 to 3.755, but it was still down more than 1% for the day.

Key Quotes:

“Moody’s Investors Service has placed Brazil’s Baa3 issuer and bond ratings on review for downgrade. The review for downgrade is driven by i) rapidly and materially deteriorating macroeconomic and fiscal trends and diminished likelihood of trend reversal in the next 2-3 years; and ii) worsening governability conditions and increased risk of policy paralysis.”

“During the review, Moody’s will assess the likelihood of further deterioration in the government’s fiscal position against the agency’s baseline assumptions supporting the current Baa3 rating, and the prospect of a faster …read more

Source:: FX Street