2025.05.1919:27:00UTC+00Brazilian Real Strengthens on USD Weakness

The Brazilian real has moved closer to 5.6 per USD, nearing its strongest value since October's mark of 5.61, observed on May 13th. This appreciation comes as the US dollar weakens in response to Moody’s downgrading of US sovereign debt to Aa1 on May 16, which resulted in declining Treasury yields and invigorated a global search for better investment returns. Within Brazil, the country's external financial standing received a boost from a March trade surplus amounting to $8.2 billion, significantly exceeding expectations and highlighting exporters’ adeptness at coping with changing tariff landscapes. Meanwhile, the Central Bank's advance estimate of GDP reflected a positive surprise with a 0.8% rise in March, elevating first-quarter growth to 1.3% and underscoring the economy’s robust momentum. On the monetary side, the Selic rate was recently increased to 14.75%, a peak not seen since 2006. The shift to a data-driven framework in forward guidance has solidified predictions that Brazil's real interest rates will remain high, thereby continuing to draw in capital flows driven by carry trade opportunities.