FX.co ★ Brazilian Real Retreats From Multi-Month Highs

The Brazilian real has declined beyond 5.82 per USD, moving away from its highest point since October 2024 of 5.63, which was reached on April 3rd. This shift has occurred as global trade tensions have intensified, causing a significant withdrawal from risk assets and negatively impacting commodity-linked currencies. Initially, Brazil gained from its minimal exposure to U.S. tariffs and its crucial position as a major agricultural and energy supplier to China. However, China's imposition of a substantial 34% retaliatory tariff on U.S. imports has significantly increased concerns over a potential global economic slowdown. This development has resulted in lower commodity prices and has adversely affected Brazil's export prospects. Consequently, expectations for robust trade surpluses, which previously supported the real, have diminished. Simultaneously, the increased market volatility is complicating Brazil's domestic policy path. With inflation expectations largely stable and the central bank approaching the conclusion of its tightening cycle, the likelihood of further interest rate hikes is decreasing.