FX.co ★ Brazilian Real Retreats From 9-Month High

The Brazilian real has depreciated, exceeding 5.47 against the US dollar, retreating from its nine-month high of 5.41 reached on July 3rd. This movement is in response to the strengthening US dollar, following President Trump's decision to delay his reciprocal-tariff deadline to August 1st and his threats of imposing additional tariffs on nations aligned with BRICS. These developments have attracted capital seeking higher yields back to developed markets. Concurrently, declining prices for Brazil's main exports, crude oil and iron ore, have reduced hard-currency inflows. Additionally, an unexpectedly widened trade deficit in June and a surprising contraction in industrial production have weakened previous indications of an emerging economic recovery. Nevertheless, Brazil's central bank has kept its interest rate at 15% to control inflation, which currently exceeds the target. This high interest rate limits the scope for further cuts and strengthens Brazil's interest-rate advantage, thus mitigating some of the downward pressure on the real.