FX.co ★ Brazilian Real Weakens on US Tariffs

The Brazilian real softened slightly to 5.09 per USD in mid-July from 5.07 earlier in the month after the United States announced a new 25% tariff on Brazilian imports, effective July 22. The measure is expected to dampen dollar inflows into Brazil by weighing on exports to the US, which could narrow the country’s trade surplus and slow the recent appreciation of the real. Lower export revenues may put upward pressure on the exchange rate in the coming months, particularly if markets downgrade Brazil’s trade balance outlook or reassess the country’s risk profile. At the same time, persistent geopolitical tensions in the Middle East and expectations that the Federal Reserve will keep interest rates higher for longer continued to cap gains in the Brazilian currency.