FX.co ★ Brazilian Real Strengthens After BCB

The Brazilian real has appreciated beyond 5.7 per USD, approaching the October 2024 peak of 5.62 seen on April 29th. This development follows investors' analysis of the recent monetary policy decision amidst reduced concerns over trade disruptions. The Central Bank of Brazil's decision to increase the Selic rate by 50 basis points, bringing it to 14.75%, and suggesting that this could be the final adjustment, has maintained one of the most attractive real interest rates globally, thereby boosting carry-trade activity. Furthermore, Brazil's strong external accounts were reinforced by a substantial trade surplus of USD 8.2 billion in April and a 3.1% year-over-year increase in industrial production. Concurrently, the Federal Reserve's choice to keep U.S. interest rates steady at 4.25–4.50% has curtailed the expansion of interest-rate differentials. Additionally, prospects of a forthcoming US–UK trade agreement and the reopening of US–China trade discussions in Switzerland have alleviated concerns over tariffs that affect exporters.