FX.co ★ Brazilian Real Resilient Amid US Tariff Rollout

The Brazilian real has strengthened to approximately 5.66 against the USD, nearing its most robust position since November 2024, previously noted at 5.65 on March 19th. This appreciation stems from a mixture of elements minimizing the repercussions of U.S. trade tensions. Brazil’s limited direct export exposure to the recently unveiled 10% U.S. tariff—affecting an estimated $2 billion in exports while shielding critical sectors such as aircraft, steel, and oil—has helped mitigate any adverse effects. Furthermore, the favorable yield differential, strategic interventions by Brazil's Central Bank through foreign exchange swaps to stabilize market fluctuations, and robust domestic policies targeting inflation management have significantly enhanced investor confidence. These factors, combined with the general weakness of the dollar and compensatory influences among commodity-oriented peers, have sustained Brazil's attractiveness for carry trade. This is true even in the face of potential risks, as ongoing U.S. inflation pressures could eventually limit Brazil's capacity for monetary easing and increase external borrowing costs.