Brazilian Real Struggles to Recover

2025-12-08 16:11 By Felipe Alarcon 1 min. read

The Brazilian real steadied around 5.44 per US dollar, struggling to recover from last week’s sharp selloff as investors monitor the impact of political election uncertainty on fiscal sustainability and risk.

Over the weekend Senator Flávio Bolsonaro signalled he may withdraw his candidacy which eased the immediate risk premium, yet his warning that any exit would come at a price has only prolonged uncertainty about the opposition’s cohesion and whether a market friendly fiscal compact can hold.

At the same time the market is sitting on two major policy events this week the Central Bank Copom decision on Selic and the Federal Reserve decision in the United States so dealers are trimming positions and awaiting clearer guidance on rates and interest differentials.

Finally, Focus survey readings only nudged inflation forecasts marginally lower while keeping Selic expectations high so the carry advantage remains strong but is not enough to offset renewed political risks.



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