The Brazilian real surged past 5.7 per USD in March 2024, its highest since November 2024, driven by fiscal discipline, high interest rates, and favorable external conditions. Brazil’s Selic rate stands at 11.25%, attracting foreign inflow, while external factors, including a weakening U.S. dollar and strong trade conditions, further support the real’s strength.
In March 2024, the Brazilian real appreciated beyond 5.7 per USD, marking its strongest value since November 2024. This increase is attributed to strong fiscal discipline, significant interest rate differentials, and favorable external conditions that heightened demand for the currency.
The National Treasury’s strategy to minimize bond issuances has effectively curtailed debt supply, which contributes to stabilized yields and reflects ongoing fiscal prudence. The Selic rate in Brazil remains at 11.25%, one of the highest globally, which fosters inflows of capital, particularly as inflation expectations are steady and a 100 basis point rate cut is anticipated shortly.
Externally, the depreciation of the U.S. dollar, largely due to dovish remarks from the Federal Reserve, has encouraged investment in emerging market assets, including Brazil. Furthermore, Brazil’s trade outlook appears positive, driven by iron ore prices exceeding $120 per ton and robust soybean futures resulting from heightened demand from China.
Support for Brazilian exports is strengthened by China’s stimulus actions, which include credit expansion and increased infrastructure spending, helping to solidify the real’s value in the international market.
The Brazilian real’s appreciation in March 2024 is fueled by effective fiscal policies, elevated interest rates, and supportive external factors. With a strategic reduction in bond issuances and a favorable trade environment driven by robust commodity prices and Chinese demand, the real stands strong against the USD. This reflects Brazil’s compelling investment narrative in emerging markets.
Original Source: www.tradingview.com
