FX.co ★ Brazilian Real Strengthens After BCB

In June, the Brazilian real advanced beyond the 5.5 mark against the USD, reaching its strongest point in eight months. This appreciation came after the Brazilian Central Bank (Copom) surprised markets with a 25 basis point rate increase to 15% and an indication of an upcoming pause, enhancing Brazil's appeal due to its high real interest rate premium. Copom's dedication to assessing the delayed effects of previous tightening measures has provided markets with confidence in a stable policy direction. Additionally, improvements in the current account deficit and strong agribusiness export data have supported the currency's value. Rising prices for iron ore and soybeans, Brazil's leading export commodities, have expanded the trade surplus and attracted capital inflows. Concurrently, the US Federal Reserve's decision to maintain its rates at a four-year peak limited the dollar's strength and encouraged investors to seek yields in Brazilian local bonds.