FX.co ★ Brazilian Real Strengthens to Over 1-Year High

In September, the Brazilian real advanced beyond 5.3 per US dollar, marking its highest value since June 2024. This appreciation followed the Central Bank's decision to maintain the Selic rate at 15%, alongside an indication of an extended pause, as inflation declines at a gradual pace, thereby increasing real interest rate differentials. Although economic activity showed signs of contraction—evidenced by a 0.5% decrease in the IBC-Br index for July—inflation persisted at approximately 5.1% in August. This figure remains significantly above the 3% target, necessitating a prudent policy approach. Consequently, market anticipations for interest rate reductions are now shifted to early 2026. Concurrently, the Federal Reserve reduced rates by 25 basis points and signaled further easing, diminishing support for the US dollar and alleviating external pressures on Brazil's economy.