On 31 August, the Brazilian real (BRL) traded at 1.59 per USD, which represented a 2.0% nominal depreciation compared with the previous month. On a year-on-year basis, the real appreciated 10.6% nominally versus the USD. On a year-to-date basis, the real has appreciated 5.0% versus the USD. On 31 August, the Brazilian Central Bank (BCB) cut interest rates by 50 basis points to 12.00%. The move helped reduce interest rate differentials that have triggered a large inflow of foreign capital into the country. However, even after the rate cut, Brazilian rates remain attractive for foreign investors and the real is likely to resume its appreciation trend in the months ahead. That said, several factors are likely to slow the pace of the appreciation of the Brazilian real. First, higher inflation and heightened uncertainty regarding future inflation path after the recent Central Bank's decision to cut interest rates should result in lower demand for the Brazilian currency and thus translate into a weaker BRL. Moreover, recently, Brazilian authorities introduced several measures to stem the appreciation of the real, including a 1% tax on derivatives transactions, a higher ceiling on reserve requirements on short USD positions and the so-called financial operations tax (IOF, Imposto sobre Operac?es Financeiras). These measures did not yet have the desired effect but should help ease the upside pressure on the real in the months ahead.
Brazil Exchange Rate
Brazilian real weakens in August
August 31, 2011
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Brazil Economic News
October 19, 2016
At its 19 October meeting, the Central Bank’s Monetary Policy Committee (COPOM, Comite de Politica Monetaria) decided to cut the benchmark SELIC interest rate for the first time in four years, lowering it from 14.25% to 14.00%.
October 18, 2016
Retail sales (excluding cars and construction) fell 0.6% in August from the previous month in seasonally-adjusted terms.
October 7, 2016
Consumer prices in September increased 0.08% over the previous month, the lowest rise since July 2014.
October 4, 2016
In August, industrial production plunged 3.8% over the previous month in seasonally-adjusted terms, which significantly contrasted the 0.1% expansion recorded in July and marked the worst result since January 2012.
October 3, 2016
The Markit manufacturing Purchasing Managers’ Index (PMI) rose slightly in September, increasing from August’s 45.7 to 46.0.