Despite widespread investor optimism Brazil’s currency outlook is challenged by a toxic mix of poor external, fiscal, and macro fundamentals. Expect BRL to underperform most EM peers. 

In this chartbook, we look at the balance of payments across DM and EM countries. The US does not fare well, but neither do a few other countries.

Global currency markets have entered a new era. This implies that the framework for analyzing exchange rates must also change. We introduce a new framework for analyzing EM currencies and classify them into…