FX.co ★ Brazilian Real Hits 7-Month High

The Brazilian real has surged to over 5.6 per USD, marking its strongest position since October. This rally comes as the US dollar experienced a decline in strength, attributed to a modest 0.2% month-on-month increase in April's CPI report. This data has weakened the Dollar Index and reduced the Federal Reserve's yield premium in comparison to its global counterparts. As markets adjust their expectations regarding significant rate hikes, the real has gained an advantage from Brazil's relatively higher carry rate. This is underpinned by the Copom minutes, which confirm that the Selic rate will stay at elevated levels, with further tightening dependent on forthcoming economic data. Concurrently, President Lula's visit to Beijing concluded with China's commitment to providing a US$9 billion credit line aimed at Latin American infrastructure. This development is fostering optimism for enhanced external financing and has bolstered the real's position as the dollar continues to decline.