29.07.202621:18:30UTC+00Brazilian Real Gains as Fed Holds Rates

The Brazilian real strengthened to 5.12 per USD, recovering from the two-week low of 5.14 touched on July 27, after the Federal Reserve left interest rates unchanged. The decision weighed on the US dollar, as roughly one-third of market participants had positioned for a rate hike.

At the same time, Brazil created a net 145,161 formal jobs in June, far exceeding market expectations of 115,000. The robust labor data underscored the resilience of the job market and bolstered expectations of a more hawkish stance from the Central Bank of Brazil (BCB).

Brazil’s relatively high interest rates have continued to support the real by boosting the attractiveness of local assets. Persistent inflationary pressures and concerns about fiscal deficits have kept the Selic rate at elevated levels. In June, the BCB reduced the Selic from 14.50% to 14.25%, but emphasized that labor market strength is still driving services inflation.

The Monetary Policy Committee (Copom) will meet on August 4–5 to determine the next Selic rate decision.