Brazil Real 7.2% Undervalued Even After Rally, BofA Says

Nov. 16 (Bloomberg) -- Brazil’s real, the best- performing major currency this year, is undervalued by 7.2 percent against the dollar based on the nation’s rising exports and higher savings, Bank of America Corp. said.

Emerging-market currencies are “broadly undervalued” against the dollar, with Latin America the most undervalued region in the world, Bank of America strategists wrote in a note to clients.

The Brazilian currency, which has gained 35 percent this year, rose 0.6 percent to 1.7126 against the dollar at 11:22 a.m. New York time. The real should appreciate to 1.60 per dollar in two to three years, Benoit Anne, the London-based head of emerging market foreign-currency and debt strategy at Bank of America, said by phone today.

“In nominal terms, the real is still undervalued,” Anne said, citing an improving current account and excess savings. “We think the real should strengthen over the long term based on our model.”

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