FX.co ★ BRL Gains In Late June

The Brazilian real traded near 5.17 per USD in June, firming somewhat toward the end of the month amid a broader pullback in the US dollar. Softer-than-expected US PCE data eased concerns about further Federal Reserve tightening, pushing Treasury yields lower and pressuring the dollar against both major and emerging-market currencies. In Brazil, the central bank’s updated Monetary Policy Report highlighted a higher risk of inflation breaching the upper bound of the target range, despite a weaker-than-expected mid-June inflation reading. Even so, the interest rate differential continued to support the real, with Brazil’s benchmark Selic rate at 14.25% versus the US policy range of 3.50%–3.75%. This wide spread has remained a key driver of foreign inflows, underpinning demand for the Brazilian currency.