Chart of the Fortnight: Brazilian Real Weakens to All-Time Low

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• The Brazilian Real (BRL) has recently hit record lows vs. the US Dollar.
• This affects the sugar market because sugar mills in Brazil (the world’s largest raw sugar exporter) hedge in USD but recognise returns in BRL.
• Although sugar prices in USD have been capped recently, comparative returns for a Brazilian mill have been increasingly tempting.
• We have therefore seen a large amount of futures market selling from Brazilian mills as they take advantage of the FX weakness.

July 2020 No.11 Returns