Brazilian Real Drops to Lowest Since August

2025-12-22 16:46 By Felipe Alarcon 1 min. read

The Brazilian real weakened toward 5.60 per US dollar, sliding to August lows as political uncertainty and domestic macro risks pushed Brazil’s risk premium higher.

The prospect of a renewed Bolsonaro-linked electoral cycle and recent congressional moves, including the Senate bill to reduce Jair Bolsonaro’s sentence, have clouded the outlook for policy cohesion and fiscal execution, prompting wider FX premia.

These pressures were reinforced by softer activity data showing the economy entered Q4 on weaker footing, cooling growth and revenue momentum and narrowing the fiscal buffer.

While the 2026 budget targets a primary surplus of 0.25% of GDP, Focus Bulletin projections continue to point to a deficit closer to 0.60% of GDP.

At the same time, the central bank has kept the Selic at a restrictive 15%, leaving real rates high but offering limited support to the real as political and fiscal uncertainty dull the appeal of carry and delay confidence in the easing path.



News Stream
Brazilian Real Weakens on Hawkish Fed and Political Concerns
The Brazilian real weakened to 5.02 per USD in late May, broadly in line with other emerging-market currencies, amid a more hawkish stance from the US Federal Reserve. Rising geopolitical uncertainty in the Middle East also fueled risk aversion and supported the US dollar. Additional pressure came from comments by Federal Reserve Governor Christopher Waller, which reinforced expectations that US interest rates could remain elevated for longer. Domestically, the weakening political position of Senator Flávio Bolsonaro continued to weigh on the real, as markets had expected the opposition to remain competitive in this year’s presidential election.
2026-05-22
Brazilian Real Retreats from Two-Year High
The Brazilian real weakened to 5.07 per USD in mid-May, retreating sharply from the two-year high of 4.89 reached earlier in the month. The decline followed reports alleging ties between Senator Flávio Bolsonaro, a contender in Brazil’s October presidential election, and Daniel Vorcaro, owner of failed lender Banco Master, who was charged with fraud. Investors assessed that the allegations could weaken Bolsonaro’s candidacy, currently viewed as President Luiz Inácio Lula da Silva’s main challenger. Abroad, the US dollar strengthened alongside rising Treasury yields as markets increasingly priced in the possibility of additional Federal Reserve interest rate hikes later this year.
2026-05-15
Brazilian Real Rebounds Slightly
The Brazilian real appreciated sligthly to 4.98 per USD in mid-May, giving back part of its recent sharp losses after briefly weakning beyond the 5.00 level. The downward move followed reports alleging ties between Senator Flávio Bolsonaro, a contender in Brazil’s October presidential election, and Daniel Vorcaro, owner of failed lender Banco Master, who was charged with fraud. Investors assessed that the allegations could weaken Flávio Bolsonaro’s candidacy, currently seen as President Luiz Inácio Lula da Silva’s main challenger. Abroad, the US dollar strengthened alongside rising Treasury yields, as markets increasingly priced in the possibility of additional Federal Reserve rate hikes later this year.
2026-05-14