FX.co ★ Brazilian Real Eases on Stronger USD

The Brazilian real depreciated beyond 5.7 per USD, influenced by the strengthened US dollar in the wake of a tariff truce between the US and China, which has boosted confidence in the greenback. On the domestic front, Brazil's Central Bank has executed its sixth consecutive interest rate hike, increasing the Selic rate by 50 basis points to 14.75%, while indicating that future decisions will rely on forthcoming data. This prudent approach has begun to reduce the inflation forecast for April 2025 to 4.8%, though it has simultaneously reduced Brazil's term premium. Concurrently, the significant rise in US yields has overshadowed Brazil's comparatively appealing real interest rate, leading to capital outflows as investors seek higher returns abroad and applying downward pressure on the real. Additionally, President Lula's trip to Beijing and a slight rise in commodity export orders provide only limited long-term support for the currency.