FX.co ★ Brazilian Real Appreciates

The Brazilian real has appreciated to approximately 5.33 against the US dollar, rebounding from the one-month low of 5.40 observed on November 21st. This shift comes as a more dovish outlook from the US Federal Reserve increasingly takes precedence over local policy expectations. Market perceptions of US monetary policy were rapidly reassessed following remarks from Fed officials, with the probability of a December interest rate cut rising to over 80%. Meanwhile, Brazil’s substantial interest rate differential, with the Selic rate holding at 15%, continues to lure investors interested in carry trades. Supporting this currency movement is domestic economic data, with the Focus Bulletin revising the 2025 IPCA forecast downward to 4.45%, alongside foreign direct investment figures for October amounting to approximately US$10.94 billion. This inflow comfortably covers the US$5.12 billion current account deficit for the month, thereby reducing the impetus for exchange rate adjustments. Furthermore, Central Bank President Galípolo has consistently emphasized that the current monetary policy stance remains restrictive, with any potential easing expected to be gradual and likely not occurring until early 2026. This reinforces investor confidence that Brazil's interest rate advantage will not dissipate abruptly.