FX.co ★ Brazilian Real Strengthens to 5.7 USD

The Brazilian real has appreciated to 5.7 per USD, maintaining its position close to an eight-month high of 5.6 observed on May 13th. This rise can be attributed to several converging factors, including increased commodity revenues, a weakening US dollar, and emerging indications of fiscal stability within Brazil. On the commodity side, crude oil prices have surged by approximately 4 percent following OPEC+'s decision to implement only limited production increases, thereby enhancing Brazil's export income and improving its terms of trade. Concurrently, the US dollar index has declined to levels not seen in nearly three years, as traders have pulled back from Treasuries amid renewed trade tensions and weaker US PMI data. This development has alleviated the costs of servicing Brazil's external debt and revived interest in dollar-funded investments into the higher-yielding Brazilian real. Domestically, despite Moody's recent adjustment of Brazil’s credit outlook from positive to stable, the Finance Ministry’s prompt reaffirmation of fiscal discipline and dedication to structural reforms has reassured markets that any potential fiscal slippage will be controlled.