The Brazilian real strengthened beyond 5.16 per US dollar, reaching its highest level since May 2024, as global markets reassessed the appeal of high-yield emerging market currencies following recent shifts in US trade policy. The advance was underpinned by the Central Bank of Brazil’s decision to keep the Selic rate at a historically restrictive 15%, preserving a substantial real-yield premium with inflation running at 4.44% in January. This wide interest rate differential has amplified carry trade inflows, particularly after the US Supreme Court’s ruling against earlier emergency tariffs initially weighed on dollar demand.
Supporting the currency’s fundamentals, Brazil posted a January trade surplus of $4.34 billion, fueled by a 17.4% jump in exports to China and firmer global oil prices. At the same time, the newly imposed 15% US Section 122 surcharges now stand in contrast to roughly $180 billion in potential tariff refunds gradually re-entering the global financial system.
