The Brazilian real hovered around 5.2 per US dollar, near its strongest level since May 2024, as markets digested the latest inflation data amid renewed fiscal concerns. January’s IPCA inflation rose to 4.44% year on year, broadly in line with expectations but higher than in December. The acceleration kept price pressures and monetary policy options in sharp focus, dampening confidence about the timing and extent of any future rate‑cutting cycle.
At the same time, political and fiscal uncertainties resurfaced. Investors closely monitored comments from Finance Minister Fernando Haddad and the broader debate over Brazil’s fiscal path and central bank governance. These factors preserved a residual risk premium and prompted foreign investors to demand higher compensation for holding real‑denominated assets. Softer commodity prices added to the pressure by eroding Brazil’s external support, reinforcing the currency’s pullback from its early‑February highs.
