“The government is getting concerned that global liquidity conditions are changing really fast and that this could push the real to a much weaker level,” Marcelo Salomon, an economist at Barclays, said in a Financial Times article.
While a weaker real could help the country’s export industry, the government is growing concerned that a sharp depreciation could exacerbate inflation. [Brazil ETFs Fall As Economy Slows]
The benchmark Bovespa Index was down 1.8% Wednesday.
Brazil country-specific ETFs were also down Wednesday. The iShares MSCI Brazil Index Fund (NYSEArca: EWZ) was down 1.5% during afternoon trading. The fund has declined 8.6% year-to-date. EWZ does not hedge against a depreciating real, so the weakeningcurrency has had a negative effect on the funds’ overall performances.
However, investors, who are still interested in Brazil and believe the currency will continue to depreciate, could take a look at the db X-trackers MSCI Brazil Hedged Equity Fund (NYSEArca: DBBR), which tries to mitigate exposure to fluctuations between the U.S. dollar and Brazilian real. The ETF is down 5.3% year-to-date.
For more information on Brazil, visit our Brazil category.
Max Chen contributed to this article.