The Brazilian real extended its recent winning streak on Wednesday, helped by a softer global dollar, record local equity prices and expectations that U.S. interest rates will finally start to fall.
Early on Thursday, the currency was trading around 5.33 per dollar, near the previous close and some 1.3% stronger than a week ago.
The move came as the dollar index slipped toward 99.6, under pressure from declining U.S. Treasury yields and heavily one-sided bets on a Federal Reserve rate cut in December.
Futures now imply roughly an 85% chance that the Fed trims its benchmark rate to the 3.50%–3.75% range, extending a nascent global easing cycle that tends to favour higher-yielding emerging markets such as Brazil.
Local assets have responded enthusiastically. The Ibovespa pushed to a fresh record above 158,000 points this week, while Brazil-focused exchange-traded funds abroad registered solid volumes and steady inflows.
Investors are locking in double-digit real yields while they still can, on the view that Brazilian rates will start to fall more decisively in early 2026.
Inflation Eases but Fiscal Doubts Keep the Real in Check
The latest inflation data strengthened that conviction. November’s IPCA-15 reading rose 0.20% on the month and 4.50% over 12 months, returning to the official target band for the first time since January.
Much of the upside surprise was driven by items seen as noise for monetary policy, allowing markets to treat the print as broadly benign rather than a new threat.
Fiscal policy remains a more complicated story. President Luiz Inácio Lula da Silva this week signed off on an income-tax reform that exempts salaries up to 5,000 reais and raises the burden on very high earners.
The package is popular with lower- and middle-income households but leaves open questions about long-term deficit control, a concern that continues to cap the real’s rally whenever headlines hint at looser budget discipline.
Technically, the dollar now trades in a 5.30–5.38 reais range, having failed to hold above 5.36 and drifting toward support near 5.30 and, below that, 5.26.
Short-term momentum indicators show an overextended move lower for the dollar, but weekly charts still point to a broader downtrend from levels near 5.90 at the start of the year.
For now, the balance of forces favours a firm real — as long as Brasília resists testing market patience on the fiscal front.