FX.co ★ Brazilian Real Holds Pullback

The Brazilian real has dropped below the 5.7 per dollar threshold, continuing its retreat from the seven-month high of 5.6 reached on May 13th. This decline is largely attributed to concerns that the central government may impose restrictions on foreign investment, prompting investors to shift away from Brazilian assets. The finance ministry recently announced a 3.5% tax on foreign currency transactions, including purchases, remittances, and transfers by offshore funds. This decision sparked a selloff of the real, leading policymakers to reconsider and partially retract the measures. Meanwhile, the latest inflation figures indicate a more noticeable deceleration in consumer prices during the first half of May. According to the most recent central bank survey, market participants anticipate that the monetary authority will maintain the benchmark SELIC rate at 14.75% for the rest of the year, with a gradual easing expected to commence next year.