The difference in the interest rates would have predicted a much greater change in the exchange rates between these two countries. This begs the question as to why the rates did not change further.
There are a few possible explanations for this discrepancy. The first is that the expected inflation in Brazil failed to material, and the second is that inflation in the U.S. was higher than expected. U.S. inflation is not high, but it is growing, whereas interest rates are not growing yet. In contrast, the Brazilian government's response to its inflation situation is more in line with what would be expected.
The real has underperformed expectations, and there could also be domestic factors. If we look at the six factors that affect exchange rates, we can see that there may be issues with respect to public debt (if Brazil has performed worse than expected) or political stability and performance. If these factors have come into play, the expectation for future interest rate changes might have deviated significantly from the expectations of a year ago.
Works...
(2012). Consumer price index -- February 2012. BLS.gov. Retrieved March 16, 2012 from http://www.bls.gov/news.release/pdf/cpi.pdf
Investopedia. (2012). Inflation and interest rates. Investopedia. Retrieved March 16, 2012 from http://www.investopedia.com/university/inflation/inflation3.asp#axzz1pI61aUrV
Oanda. (2012). USD/CAD details. Oanda.com. Retrieved March 16, 2012 from http://www.oanda.com/currency/converter/
Spicer, J. (2012). In historic shift, Fed sets inflation target. Reuters. Retrieved March 16, 2012 from http://www.reuters.com/article/2012/01/25/us-usa-fed-inflation-target-idUSTRE80O25C20120125
Statistics Canada. (2012). Latest release from the Consumer Price Index. Statistics Canada. Retrieved March 16, 2012 from http://www.statcan.gc.ca/subjects-sujets/cpi-ipc/cpi-ipc-eng.htm
Van Bergen, J. (2012). 6 factors that influence exchange rates. Investopedia. Retrieved March 16, 2012 from http://www.investopedia.com/articles/basics/04/050704.asp#axzz1pI61aUrV
Bush, who declared that corporations which jeopardized the investments and jobs of millions of individuals should pay their dues. The United States Senate and the House of Representatives also became involved and proposed numerous modifications. The pillar of the changes occurred in financial reporting after the accounting scandals is based on increased transparency and more support in conducting audit operations. The XBRL system for instance will allow the Securities and
Behavioral Finance and Human Interaction a Study of the Decision-Making Processes Impacting Financial Markets Understanding the Stock Market Contrasting Financial Theories Flaws of the Efficient Market Hypothesis Financial Bubbles and Chaos The stock market's dominant theory, the efficient market hypothesis (EMH) has been greatly criticized recently for its failure to account for human errors, heuristic bias, use of misinformation, psychological tendencies, in determining future expected performance and obtainable profits. Existing evidence indicates that past confidence in the
Monetary Policy and Mortgages The businesses of mortgages lead to their own problems. Recently it was stated by the attorney for the Western District of Missouri that the owner of a mortgage invest company and three employees of Ameriquest Mortgage were charged with an indictment. The effort made by them was to cheat Ameriquest and some investors through the process of false loans for mortgage. Brent Michael Barber who is 40
According to Kepler Equities, there will be a 5% average growth in sales over the next five years for EuroDisney as a result, and breakeven is considered to be achievable in the 2012 timeframe. While EuroDisney can't compete with a strong British Pound and Euro relative to the weak American dollar, they can do what Disney does best, and that is bring in the flashy, new rides and entertainment.
Olympus Accounting Scandal In economic boom that occurred in 1980s, a lot of Japanese enterprises struggled to sustain sales in international market because of the strong yen. Akin to several other businesses, Olympus offset its decreasing sales by participating in offshoots and non-core businesses, promoted by low rates of interest and easy credit access. After the Japanese bubble burst, the company sustained huge losses on its various investments, amounting to
Stability of Employment Education has long been associated with earnings potential. As a person completes higher levels of education, it makes sense that their level of pay also increases. One issue with this trend is that some jobs do not require the higher levels of education because the tasks required do not warrant it. There is also the class structure that it puts in place with intelligence rather than wealth being