FX.co ★ 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 by the US Federal Reserve. Rising geopolitical uncertainty in the Middle East also fueled risk aversion and bolstered demand for the US dollar. Additional downward pressure on the real followed comments from Federal Reserve Governor Christopher Waller, which strengthened expectations that US interest rates will remain elevated for longer. On the domestic front, the deteriorating political standing of Senator Flávio Bolsonaro continued to weigh on the currency, as markets had anticipated a more competitive opposition in this year’s presidential election.