Brazilian Real: Exchange rate seen weaker into year-end – Rabobank

Rabobank’s Mauricio Une and Renan Alves note that the Federal Reserve (Fed) raised rates by 25 bps and signaled a more restrictive stance, while Copom cut the Selic rate to 13.75%. The Brazilian Real (BRL) weakened slightly to BRL 5.1462 per USD but still outperformed most emerging peers. Rabobank expects a narrower rate differential and a stronger Dollar to push USD/BRL toward 5.35 by year-end.

Real outlook tied to rate spreads

"Externally, in the United States, the Federal Reserve (Fed) raised interest rates by 25 bps and signaled a more restrictive monetary policy path to contain second-round inflationary effects. However, Rabobank believes that the stagflationary shock makes a single rate hike the more likely outcome, with any additional increase contingent on developments in the Middle East and the resilience of the U.S. economy."

Análisis de TMGM: noticias de mercados financieros, calendario económico e información del mercado

"The Brazilian real closed the previous week at BRL 5.1462 per USD, implying a 0.49% depreciation against the U.S. dollar over the week, ranking as the ninth-best performance among 24 emerging-market currencies."

"Given expectations of a narrower interest rate differential between Brazil and advanced economies throughout 2026, together with a potential global recovery of the U.S. dollar amid a fragile domestic fiscal backdrop in an election year, we expect the exchange rate to end the year at BRL 5.35 per USD."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)