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.



News Stream
Brazilian Real Struggles to Hold Mid-2024 Highs
The Brazilian real is struggling to sustain its mid-2024 highs after hitting 5.12 per US dollar on February 23rd, due to a reversal in domestic inflation and renewed global trade instability following the February 20th US Supreme Court ruling on IEEPA tariffs. While the currency initially rose on a massive real-yield spread with the Selic rate at 15%, confidence fractured after mid-month inflation jumped 0.8% against a 0.6% forecast in mid-February. This spike, the steepest in a year, forced a hawkish shift by reducing the chance of a 50-basis-point cut on March 18th. Pressure was intensified by the US administration pivot to Section 122 surcharges, which launched a 10% global import tax on February 24, threatening Brazil’s 17.4% export momentum. Although record tax revenue of R$2.89 trillion and a $4.34 billion January trade surplus provide a cushion, the real is squeezed as the central bank easing cycle clashes with sticky 4.1% annual inflation and shifting trade laws.
2026-02-27
Brazilian Real Hits Strongest Since May 2024
The Brazilian real appreciated past 5.16 per US dollar to hit its strongest level since May 2024 as global markets re-evaluated the attractiveness of high-yielding emerging market currencies in the wake of US trade policy shifts. The advance was supported by the Central Bank of Brazils decision to hold the Selic rate at a historically restrictive 15%, maintaining a massive real-yield spread with January inflation at 4.44%. This interest rate differential has intensified carry trade inflows, particularly as the US Supreme Court ruling against previous emergency tariffs initially dampened dollar demand. Strengthening the currencies fundamental backing, Brazils January trade surplus reached $4.34 billion, driven by a 17.4% surge in exports to China and firming global oil prices. The 15% US Section 122 surcharges now compete with the $180 billion in potential tariff refunds trickling back into the global financial system.
2026-02-23
Brazilian Real Hits 20-month High
The Brazilian Real touched 5.16 against the USD, the highest since May 2024. Over the past 4 weeks, US Dollar Brazilian Real lost 3.79%, and in the last 12 months, it decreased 10.36%.
2026-02-12