Brazilian Real Hits 25-month High

The Brazilian Real touched 4.94 against the USD, the highest since March 2024. Over the past 4 weeks, US Dollar Brazilian Real lost 5.34%, and in the last 12 months, it decreased 12.82%.

The Brazilian real strengthened to 4.95 per dollar, the strongest level since March 2024, amid support from higher oil prices and the outlook of high interest rates. The ongoing conflict between Iran and the US has suspended oil flows from the Middle East for nearly two months, lifting global energy prices and increasing foreign exchange inflows for alternative energy exporters such as Brazil. On top of that, the pro-inflationary risks from higher energy prices drove officials in the Central Bank of Brazil to suspend the outlook of multiple rate cuts signaled before the war, boosting foreign investment in Brazilian fixed-income assets. These developments were enough to strengthen the currency despite of the flight to harder assets that typically occur with geopolitical tensions.

The Brazilian real is trading around 4.98 per dollar, retreating to levels seen in mid-April. This upward pressure on the USD/BRL pair is driven by a global strengthening of the greenback (DXY at 98.16) following Israel's attack on Iran, which has triggered widespread risk aversion. Simultaneously, crude oil prices have surged 4.6% to $87.75 due to potential supply disruptions in the Strait of Hormuz. Although Brazil is a net oil exporter, the "flight to quality" sentiment currently prevails; the dollar's strength and geopolitical uncertainty are neutralizing the benefits of higher commodity prices. Consequently, the Brazilian currency remains volatile as it tests key technical resistance levels.