FX.co ★ Brazilian Real Hovers Near 1-Month Low

The Brazilian real is trading around 5.58 per USD, close to levels seen in early June. This downturn is largely due to the significant rally of the US dollar, driven by US–EU and US–Japan trade agreements that have alleviated fears of escalating tariffs. These developments have strengthened the outlook for the US economy and reinforced expectations of a determined Federal Reserve. On the domestic front, concerns are rising about President Trump's impending 50% tariff on Brazilian exports, which is set to take effect on August 1st. This has led exporters to hedge their receivables and repatriate dollars sooner than usual. Meanwhile, Brazil's central bank finds itself in a challenging position. It faces a high inflation rate of 5.3% as indicated by the mid-July IPCA-15 index, and a Selic rate of 15% which appears unlikely to change. This limits its options to defend the economy through rate cuts or more substantial dovish signals. Although high real yields remain attractive for carry-trade inflows, and Brazil's record-breaking agricultural exports provide periodic support to the foreign exchange market, these factors have only managed to soften—not reverse—the real's depreciation trend.