The Brazilian real depreciated toward the 4.9 per USD level, dropping since touching a three month high of 4.85 on August 23rd, as slowing inflation in the Brazilian economy may allow the central bank to extend its relatively dovish momentum. Indicators for core and services prices indicated a steady trend towards disinflation in July, aligning with market anticipation that the BCB will extend its sharper-than-expected 50bps rate cut this month and deliver another rate slash in its upcoming meeting. Additionally, July’s fresh decline in loan growth indicated that monetary conditions are restrictive, possibly warranting expansionary policy. Still, the currency holds an appreciation of 7.8% against the dollar year to date, as the central bank’s real interest rates remain among the world’s highest. Strong foreign demand for Brazilian commodities also supported the BRL, with Brazil’s trade surplus remaining elevated since hitting a record $11.4 billion in May.
Historically, the Brazilian Real reached an all time high of 5.99 in May of 2020. Brazilian Real - data, forecasts, historical chart - was last updated on August of 2023.
The Brazilian Real is expected to trade at 5.00 by the end of this quarter, according to Trading Economics global macro models and analysts expectations. Looking forward, we estimate it to trade at 5.38 in 12 months time.