30.12.202517:37:05UTC+00Brazilian Real Rebounds After Labor Data

The Brazilian real has firmed to approximately 5.55 per US dollar following a period of testing early August lows. This development comes as markets have digested stronger-than-anticipated labor data alongside a more dovish US policy outlook. Notably, Brazil's unemployment rate has declined to a historic low of 5.2% for the moving quarter ending in November 2025. This figure is lower than both the previous 5.6% and the anticipated 5.4%, underscoring the robustness of the labor market even amidst persistently high real interest rates impacting both households and businesses. Such resilience bolsters domestic demand and provides the Brazilian Central Bank with the flexibility to maintain a hawkish approach should the pace of disinflation slow. Concurrently, Brazil continues to offer substantially high real yields, with the 10-year rate remaining in the double digits. This scenario encourages sustained portfolio inflows into local bonds and money markets, presenting an attractive carry trade opportunity compared to developed economies. On the external front, softened expectations regarding US monetary policy have exerted pressure on the dollar, thus narrowing interest rate differentials.