FX.co ★ Brazilian Real Near 5-Month High

The Brazilian real is approaching 5.7 per USD, nearly reaching its highest level since November 2024, marked by 5.65 on March 19th. This surge reflects renewed investor confidence in Brazil’s monetary policy prospects, following the central bank’s recent Monetary Policy Report. Although the central bank has revised down its 2025 GDP growth forecast to 1.9% and recognized sustained inflationary pressures — with expected rates exceeding the 3% target into the next year — it has indicated a slower trajectory for rate hikes, suggesting the next increase may be less than 100 basis points. This development has bolstered expectations that the Selic rate will stay high for a prolonged period, thus enhancing the appeal of the real in carry trade strategies given Brazil's exceptionally high real interest rates. Additionally, the value of the real is being supported by mid-March inflation data, which showed a smaller-than-anticipated annual rise of 5.26%, thereby stabilizing near-term inflation expectations and bolstering the case for maintaining tight monetary policy.