Citi has replaced the Brazilian real with the rand in its emerging market arbitrage basket.

Citigroup has replaced the Brazilian real with the South African rand in its emerging markets arbitrage portfolio, citing electoral risks in the South American country and rising gold prices. Strategists, including Dirk Willer, wrote in a report to clients, "We expect a moderate risk premium on Brazilian assets ahead of the first round of elections." It is anticipated that a more dovish adjustment in the Federal Reserve's monetary policy will support gold prices, although Iran-related risks are driving gold prices higher. "The rand has significantly outperformed other currencies during the rise in gold prices." The South African Reserve Bank is also expected to raise interest rates further, which will support the rand's exchange rate. Strategists have recently increased their long positions on the South African rand.