Brazilian Real Weakens Toward Early-August Lows

2025-12-26 13:55 By Felipe Alarcon 1 min. read

The Brazilian real weakened toward 5.56 per US dollar, nearing early August lows as investors reassessed the political risk premium required to hold Brazilian assets.

Former president Jair Bolsonaro’s confirmation of Flávio as his preferred presidential nominee revived concerns over next year’s policy direction and fiscal coherence, encouraging non resident outflows, widening FX premia, and keeping the outlook for policy execution uncertain.

Earlier in the month, the currency had drawn some support from softer inflation data, with Brazil’s mid month inflation easing to 4.41% in December, broadly in line with expectations near 4.4% and still within the Central Bank’s 1.5% to 4.5% tolerance band.

The print reinforced the disinflation narrative and helped trim the inflation risk premium priced into the real.

At the same time the US dollar softened despite a strong 4.3% Q3 GDP reading, as markets continued to price Fed easing next year and safe haven demand faded.



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