Insight to All Things Currency and Treasury Management

The Brazilian currency plummeted yesterday on the news that President Michel Temer was embroiled in a bribery scandal, casting a shadow over the already troubled Temer administration – and the Brazilian economy.

The currency plunged 8 percent against the U.S. dollar, a drop that essentially wiped out all its gains since December. Stocks dropped as well, falling 10 percent Thursday morning – a decline not seen since 2008.

Although Temer denies any wrongdoing, news of the scandal triggered economic ripples around the globe, largely because many analysts were optimistic about the reals’ recent climb. Many saw it as confirmation that the country had finally turned the corner on a two-year economic slump. Many of these same analysts had also been enthusiastic about Temer’s promises of economic and political reforms last year following the 2016 impeachment of his predecessor, Dilma Rousseff.

But, since taking office, Temer’s approval ratings have steadily dipped as he tangled with Brazilian lawmakers over unpopular reform proposals and ongoing charges of corruption in his administration.

Yesterday’s scandal marks not only the latest nail in Temer’s political coffin, it may also mean Brazil’s prolonged economic woes are far from over.

In the meantime, corporate treasury professionals and CFOs concerned about what this currency crisis might mean to their FX portfolios need to determine their currency exposures.

Some questions to ask:

Prior to yesterday’s headlines, did you know what your exposure was – enabling you to better manage the risk?

Did you know your exposure when the news broke?

Do you know what your exposure is now?

At the press of a button, FiREapps customers have the data necessary to an answer “Yes” to those questions and more.

If the answers are unclear for you, maybe it’s time to talk to FiREapps.

Want to learn more? See the FiREapps Currency Crisis Infographic for an overview of recent currency surprises.