12.09.202516:02:26UTC+00Brazilian Real Rises to Over 1-Year High

In September, the Brazilian real appreciated beyond 5.4 per US dollar, marking its strongest level since June 2024. This development was influenced by the anticipation of the Federal Reserve easing its monetary policy, leading to a weaker dollar. Concurrently, Brazil's appealing interest rates and positive inflation trends drew in foreign investments. Internationally, recent indicators from the U.S. showed softer labor and pricing data, including substantial downgrades in payroll figures and a decline in wholesale and producer inflation. This resulted in lower U.S. yields and weakened the dollar, alleviating a primary external challenge. Domestically, August's inflation rate of 5.13% was unexpectedly low, indicating a reduction in headline inflation and subsequently lowering the inflation risk premium. This disinflationary trend, coupled with Brazil's robust Selic rate of 15%, enhances the attractiveness of the country's interest-rate differentials. On another front, potential volatility from political uncertainties linked to the Bolsonaro trial persists but has so far been overshadowed by the global shift in funding dynamics and Brazil's improving inflation outlook.